.Ajl 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


KIRCHWEY'S  CASES 


ON  THE 


LAW   OF  MORTGAGE 


SECOND  EDITION 


BY 

I.  MAURICE  WORMSER 

PROFESSOR  OF  LAW,  FORDHAM  UNIVERSITY  LAW  SCHOOL 

AUTHOR  OF  CASEBOOKS  ON  CORPORATIONS, 

CONTRACTS,  ETC. 


NEW  YORK 

BAKER,  VOORHIS  AND  COMPANY 

1920 


r 


Copyright,  1917, 

BY 

3AKER,  VOORHIS  &  CO. 


9o 

DEAN  HARLAN  F.  STONE  AND  HIS  COLLEAGUES  ON 

THE  LAW  FACULTY  OF  COLUMBL\  UNIVERSITY 

THE  SECOND  EDITION  OF  THIS  WORK  IS 

DEDICATED,  AS  A  SLIGHT   MARK 

OF  ITS  AUTHOR'S  ESTEEM 

AND  APPRECIATION. 

I.  M.  W, 


735158 


PREFACE  TO  SECOND  EDITION 

Kirch wey's  Cases  on  the  Law  of  Mortgage  appeared  in  1902 
and  at  once  met  with  a  favorable  reception.  The  work  has  since 
been  used  as  the  basis  of  instruction  in  many  leading  law  schools. 
In  the  last  fifteen  years  many  decisions  on  mortgage  law  have  been 
rendered,  and  a  new  edition  has  become  necessary.  The  editor 
of  the  present  edition  has  sought  to  include  a  number  of  the  recent 
cases  of  importance  and,  in  particular,  some  specimens  of  valuable 
present-day  opinion-writing.  These  opinions  demonstrate  that 
our  courts  of  equity,  far  from  being  decadent,  are,  on  the  other 
hand,  fully  alive  to  new  conditions  and  are  eager  and  anxious  to 
adjust  the  rules  of  equity  to  the  needs  of  the  community.  The 
recent  cases  printed  in  this  edition,  dealing  with  Agreements 
for  Collateral  Advantage  and  Clogging  the  Equity  of  Redemption,, 
furnish  a  striking  illustration  of  this. 

Chapters  have  been  added  dealing  with  the  subjects  of  Priori- 
ties and  of  Special  Equities  Coupled  with  the  Mortgage  Relation 
such  as  Contribution,  Exoneration,  Subrogation  and  Marshalling. 
Cases  have  also  been  inserted  dealing  with  the  topic  of  the  Enforce- 
ment of  the  Mortgage  by  the  Mortgagee,  as  an  adequate  treat- 
ment of  mortgage  law  demands  some  consideration  of  foreclosure 
proceedings. 

In  the  preparation  of  this  edition  some  attention  has  been  di- 
rected to  Corporate  and  Railroad  Mortgages,  although  it  has  be- 
come clear  in  the  last  few  years  that  this  is,  in  itself,  a  subject 
which  demands  more  especial  attention  from  the  law  schools 
than  it  has  hitherto  received.  The  preparation  and  enforcement 
of  corporate  bonds  and  mortgages,  particularly  of  quasi-public  cor- 
porations, might  profitably  constitute  the  subject-matter  of  an 
elective  law  course.  It  is  clear  that  in  the  time  now  allotted  to  the 
course  on  mortgages  in  law  schools  due  consideration  cannot  be 
devoted  to  this  branch  of  the  subject. 

The  editor  has  refrained  from  over-indulgence  in  footnotes. 
A  case  book  is  not  intended  to  serve  the  functions  of  an  encyclo- 
pedia or  of  a  text-book.  In  some  instances,  however,  additional 
notes  have  been  deemed  necessary. 

Acknowledgment  is  made  to  the  editor's  friends,  John  Norton 
Pomeroy  and  Harlan  F.  Stone,  for  helpful  suggestions. 

I.  Maurice  Wormser. 
New  York,  N.  Y.,  April,  1917. 

V 


TABLE  OF  CONTENTS 

BOOK  I 
Introduction— Property  Security  for  Debt 


PAGE 

1 


(a)  Pledge  and  Hypothecation 

(b)  The  Common  Law  Mortgage ^ 

(c)  The  Equitable  Mortgage 15 

BOOK  II 
Essential  Elements  of  the  Mortgage 

CHAPTER  I 

Conveyance 1^ 

Sec.  1 .  Mortgage,  Pledge  and  Lien 19 

2.  After-Acquired  Property 28 

3.  Informal  Mortgages— Equitable  Liens 89 

4.  Mortgages  by  Estoppel 130 

CHAPTER  II 

Security 1^^ 

Sec.  L  Mortgage  and  Conditional  Sale 139 

2.  Absolute  Deed— Parol  Evidence 167 

CHAPTER  III 

The  Obligation  Secured 196 

Sec.  L  Is  an  Obligation  Necessary? 196 

2.  Illegal  Obligations 213 

3.  Future  Advances 235 

BOOK  III 
Nature  and  Incidents  of  the  Mortgage  Relation 

CHAPTER  I 

Common  Law  Rel.ations. 261 

Sec.  1.  Title 261 

2.  Possession -^"^ 

3.  Dower  and  Curtesy .  . 313 


4.  Fixtures. 


328 


5.  Waste  and  Repair 356 

vii 


Viii  TABLE   OF    CONTENTS 

CHAPTER  II  PAGE 

Equity  Relations 375 

Sec.  1.  Once  a  Mortgage,  Always  a  Mortgage 375 

2.  Release  of  the  Equity  of  Redemption 388 

3.  Agreements    for    Collateral    Advantage — Clogging    the 

Equity  of  Redemption 407 

4.  Tacking  Collateral  Claims 444 

5.  Mortgagee's  Account 448 

(a)  Waste,  Repair  and  Improvements 448 

(b)  Rents  and  Profits — Annual  Rests 460 

(c)  Superior  Liens 468 

(d)  Mortgagee,  How  far  a  Trustee 474 

CHAPTER  III 
Extension  of  Mortgage 498 

CHAPTER  IV 

Assignment  of  Mortgage 509 

Sec.  1.  Mode  of  Transfer 509 

2.  Effect  of  Transfer 526 

CHAPTER  V 

Discharge  of  Mortgage 576 

Sec.  1.  Tender  and  Payment 576 

(a)  In  General 576 

(b)  After  Default 585 

2.  Other  Discharge  of  Debt 614 

CHAPTER  VI 

Priorities 637 

CHAPTER  VII 

Special  Equities  Coupled  with  the  Mortgage  Relation:  Herein 

OF  Marshalling 673 

BOOK  IV 

Enforcement  of  the  Mortgage  by  Mortgagee 699 

(a)  Strict  Foreclosure 699 

(b)  Foreclosure  by  Entry 704 

(c)  Foreclosure  under  Power  of  Sale 711 

(d)  Foreclosure  by  Equitable  Action 738 

Forms 761 


TABLE   OF  CASES 


A  PAGE 

Abbott  V.  Frost 659 

Ackerman  v.  Hunsicker 252 

Aguilar  v.  Aguilar 675 

Ahrend  v.  Odiorne lOG 

Amhurst  v.  Dawling 475 

Anonymous 460 

Astor  V.  Hoyt 265 

Atwood  V.  Fisk 231 

B 

B.  V.  W.  (see  W) 213 

Baily  v.  Smith 544 

Bairdt;.  Baird 204 

Barrett  v.  Hinckley 516 

Batty  V.  Snook 375 

Baxter  v.  Manning 444 

Beaver  v.  Slanker 678 

Bickerton  v.  Walker 533 

Biggs  V.  Hoddinott 411 

Bogert  V.  Bliss  &  Robert 96 

Borst  V.  Corey 624 

Bosanquett  v.  Dashwood 215 

Boyd  V.  Shaw 704 

Brennan  v.  Whitaker 333 

Brett  <'.  Carter 49 

Broad  v.  Selfe 408 

Brown  v.  Bement 23 

Brown  v.  Cole 579 

Buckhn  v.  Bucklin 196 

Burgaine  v.  Spurling 578 

Burden  v.  Kennedy 262 

Burdick  v.  Jackson 104 

Burgh  V.  Francis 15 

Bush  V.  Cooper 618 

Butler  i;.  Miller 614 

C 

Campbell  v.  Dearborn 184 

Campbell  /•.  Tompkins 201 

Carpenter  v.  Longan 553 

Carrigan,  The  Olivia  A 675 

Cashborn  v.  Inglish 314 


PAGE 

Challis  V.  Casborn 444 

Chappell  V.  Jardine 284 

Chase  v.  Peck 99 

Clark  V.  Reyburn 699 

Clark  V.  Simmons 717 

Clary  v.  Owen 331 

Conard  v.  Atlantic  Ins.  Co 24 

Conway  v.  Alexander 140 

Cook  V.  Bartholomew 210 

Cooper  V.  Davis 361 

Cotterell  v.  Purchase 167 

Coyle  V.  Davis 145 

Curtis  V.  Moore 654 

D 

Daly  V.  Maitland 440 

Davenport  v.  Shants 339 

Davis  V.  Battine 614 

Davis  V.  Bechstein 572 

Despara  v.  Walbridge 181 

Dexter  v.  Arnold 449 

Dodge  ;;.  Crandall 501 

Dolliver  v.  St.  Joseph  Ins.  Co .  .  .  287 

Donovan  v.  Twist 279 

E 

Eaton  V.  Whiting 269 

Elterman  v.  Hyman 1 10 

Emanuel  College  v.  Ewens 585 

Erie   County    Savings    Bank    v. 

Schuster (>60 

Everson  v.  McMullen.  . 322 

F 

Fairclough  v.  Swan  Brewery  Co., 

Ltd 425 

Fanning  v.  Dunham ^ . .  .  218 

Foster,  Ex  parte 26 

Franklin  v.  Neate 19 

Fullerton  v.  Provincial  Bank  of 

Ireland 637 

ix 


TABLE    OF   CASES 


G  PAGE 

GaskiU  r.  Wales 682 

Gibson  i-.  Crehore 579 

Godfrey  v.  Watson 468 

Green  v.  Butler 391 

Green  r.  Hart 510 

Groverv.  Flye 584 

H 

Haddington  Island  Quarry  Co., 

litd.,  V.  Huson 714 

Hall  V.  Westcott 494 

Hansom  v.  Derby 448 

Harbert's  Case 687 

Harper  !'.  Ely 469 

Harris  v.  Mills 633 

Heams  v.  Bance 445 

Herrmann  v.  Cabinet  Land  Co .  .   309 
Hodges  V.  Tennessee  Marine  & 

Fire  Ins.  Co 178 

Holridge  v.  Gillespie 475 

Holroyd  v.  Marshall 28 

Howard  v.  Harris ^75 

Howard  v.  Robbins 683 

Hubbell  ('.  Moulson 306 

Hughes  V.  Williams •  460 

Hyman  v.  Hauff -  •  256 

Hyndman  v.  Hyndman 478 


Jennings  v.  Ward 407 

Jones  V.  Clark 294 

K 

Keech  v.  Hall 289 

Kelleran  v.  Brown 169 

Kimball  v.  Lockwood 300 

King  V.  Smith 356 

Kortright  v.  Cady •   590 

Kreglinger    v.    New    Patagonia 

Meat  &  Cold  Storage  Co.  . .  .   429 
ivribbs  V.  Alford 54 


Lawrence  i'.  Knap  &  Menzey .  .  .  509 

Lee  V.  Stone 446 

Libby  v.  Tufts 693 

Looker  v.  Peckwell 48 

Lord  V.  Morris 629 

Lutton  V.  Rodd 586 


M  PAGE 

Manlove  v.  Bale 474 

Manning  v.  Burges 586 

Maslin  v.  Marshall 725 

Matthews  v.  Sheehan 153 

Matthews  v.  Wallwyn 526 

Maynard  v.  Hunt 588 

McBride  v.  Potter-Lovell  Co.  .  .  673 

McLaughlin  v.  Cosgrove 230 

McMurphy  v.  Minot 263 

Merchants'    Bk.    of    Buffalo    v. 

WeiU 568 

Mickles  v.  Dillaye 453 

Monarch  Coal  &  M.  Co.  v.  Hand  696 

Moody  V.  Wright 38 

Mooney  v.  Byrne 379 

Moore  v.  Cable 450 

Morris  )'.  Budlong 464 

Morton  v.  Allen 157 

Moshier  v.  Norton 467 

Moss  V.  Gallimore 291 

Moulton  V.  Cornish 742 

Mowry  v.  Sanborn 728 

N 

Nash  V.  Preston 313- 

Noel  V.  Jevon 314 

Noys  V.  Mordant 261 

Nutt  V.  Cuming 754 

O 

Odell  V.  Montross 401 

Olds  V.  Cummings 539 

Olivia  A.  Carrigan,  The. 675 

Olmstead  v.  I^atimer 504 

Orbyj;.  Trigg 407 

P 

Parker  v.  Clarke 52& 

People's  Trust  Co.  v.  Smith 134 

Perry  v.  Board  of  Missions 117 

Peterson  v.  Clark 359 

Pettibone  v.  Griswold 235 

Pickett  V.  Barron 644 

Pierce  v.  Emery 72 

Piatt  r.  N.  Y.  &  Sea  Beach  Ry. 

Co 8^ 

Pratt  V.  Huggins 620 

R 

173 

280 


Reading,  Town  of,  v.  Weston .  . 
Rector  Christ  Church  v.  Mack. 


TABLE    OF    CASES 


XI 


PAGE 

Reynolds  v.  Ashby  «fe  Son 349 

Robinson  v.  Williams 244 

Rochpster  Distilling  Co.  v.  Rasey  57 
Rothschild  ;'.  Title  Guar.  &  T. 

Co 130 

Russel  V.  Russel 89 

Russell  I'.  Smithies 448 

Russell  r.  Southard 146 

Ryan  v.  Holliday 748 

S 
Samuel  v.  Jarrah  Timber  &  Wood 

Paving  Corp 420 

Sanford  v.  Hill 688 

Santley  v.  Wilde 417 

Schoenherr  r.  Van  Meter 126 

Searle  v.  Sawyer 371 

Shaeffer  v.  Chambers 462 

Sheldon  v.  McFee 162 

Shields  v.  Lozear 603 

Sidenberg  v.  Ely 470 

Sir  Simeon  Stewart's  Case 16 

Smith  i'.  Smith 122 

Smithhurst  r.  Edmunds 44 

Spring  V.  Short 640 

Stevens  v.  Theatres,  Ltd 738 

Stillman  v.  Looney 228 

St.  John  V.  Wareham 139 

Stoddard  ;;.  Hart 90 

Stone  V.  Livingston 352 

Stone  V.  Patterson 299 

Stoughton  V.  Pasco 238 

Stow  V.  Tifft 319 

StoweU  V.  Pike 359 

Strong  t'.  Stewart 172 

Summers  v.  Bromley 751 

Sullivan  v.  Corn  Ex.  Bk 650 

Swart  V.  Service 176 

T' 

Taylor  v.  Weingartner 721 

Tealy.  Walker 302 

Tefft  IK  Munson 276 

Ten  Eyck  r.  Craig 486 

Thompson  v.  Kenyon 708 

Tholen  v.  Dufify 438 


PAGE 

Tifft  V.  Horton 343 

Titley  v.  Davis 578 

Titus  V.  Nielson 318 

Titusville    Iron    Co.  v.   City  of 

New  York 67 

Town  of  Reading  v.  Weston 173 

Trenor  v.  Le  (^ount 750 

Trimm  v.  Marsh 271 

TruU?'.  Skinner 3SS 

Trustees    of    Union    College    )'. 

Wheeler 557 

Tuthillr.  Morris 609 

U 

U.  S.  Fid.  &  Guar.  Co.  i^.  U.  S.  & 
Mexican  T.  Co 663 

Union  College,  Trustees  of,  v. 
Wheeler 557 

V 

Vanhouten  v.  McCarty 498 

Vaniman  v.  Gardner 115 

Van  Pelt  ('.  McGraw 365 

Van  Vronker  v.  Eastman 466 

Very  v.  Russell _ 711 

Villa  V.  Rodriguez 396 

W 

W.  V.  B.  (see  B) 213 

Walmsley  v.  Milne 328 

Warden  v.  Adams 513 

Webb  V.  Comm'rs  of  Heme  Bay.  530 

Weinstein  v..  Sinel 756 

Wheeler  v.  Kirtland 647 

WiUiams  v.  Fitzhugh 220 

Williams  v.  Townsend 481 

Wilson  1'.  Maltby 368 

Wiltshire  r.  Smith 586 

Worth  V.  Hill 691 

Y 

Youngs  V.  Wilson 248 

Z 

,Zartman  v.  First  Nat.  Bk 62 


CLASSIFICATION  OF  RIGHTS  AND  WRONGS 

(Langdell:  13  Harvard  Law  Rev.  537,  639; 
Brief  Survey  of  Equity  Jurisdiction,  220) 

RIGHTS 


Legal 
Rights 


Equitable 
Rights 


Absolute 
Rights  * 


Obligations 
Ex-Aequitate 


Relative 
Rights  t 


Personal 
Rights 


Rights  op 
Property 


Obligations 


Duties 


Corporeal     Incorporeal       Ex-         Ex-    Public     Private 
Contractu    Lege 

WRONGS 


Breaches 
(of  obligations) 


Torts 


Affirmative  Negative 

*  Generally  called  rights  in  rem.  (violations  of  an     (violations  of  a 

■;■  Generally  called  rights  in  personam.    ^ggQ^UTE  right)        private  duty) 


SELECT  CASES  ON  THE  LAW  OF 
MORTGAGE 

BOOK  I 
INTRODUCTION:  PROPERTY  SECURITY  FOR  DEBT 

(a)  Pledge  and  Hypothecation 

Langdell,  Classification  of  Rights  and  Wrongs,  13  Harv. 
L.  R.  539,  540.  An  obligation  is  either  personal  or  real,  according 
as  the  obligor  is  a  person  or  a  thing.  .  .  . 

A  real  obligation  is  undoubtedly  a  legal  fiction,  but  it  is  a  very 
useful  one.  It  was  invented  by  the  Romans,  from  whom  it  has 
been  inherited  by  the  nations  of  modern  Europe.  That  it  would 
ever  have  been  invented  by  the  latter  is  very  unlikely,  partly  be- 
cause they  have  needed  it  less  than  did  the  ancients,  and  partly 
because  they  have  not,  like  the  ancients,  the  habit  of  personifying 
inanimate  things.  The  invention  was  used  by  the  Romans  for  the 
accomplishment  of  several  important  legal  objects,  some  of  which 
no  longer  exist,  but  others  still  remain  in  full  force.  It  was  by 
means  of  this  that  one  person  acquired  rights  in  things  belonging 
to  others  {jura  in  rebus  alienis).  Such  rights  were  called  servitutes 
(i.  e.,  states  of  slavery)  in  respect  to  the  thing  upon  which  the 
obligation  was  imposed,  and  they  included  every  right  which  one 
could  have  in  a  thing,  short  of  owning  it.  These  servitudes  were 
divided  into  real  and  personal  servitudes,  being  called  real  when 
the  obligee  as  well  as  the  obligor,  i.  e.,  the  master  (dominus)  as 
well  as  the  slave  (servus),  was  a  thing,  and  personal  when  the 
obligee  was  a  person.  The  former,  which  may  be  termed  servi- 
tudes proper,  have  passed  into  our  law  under  the  names  of  ease- 
ments and  profits  d  prendre.  The  latter  included  the  pignus  and 
the  hypotheca,  i.  e.,  the  Roman  mortgage — which  was  called  pignus 
when  the  thing  mortgaged  was  delivered  to  the  creditor,  and 
hypotheca  when  it  was  constituted  by  a  mere  agreement,  the  thing 
mortgaged  remaining  in  the  possession  of  its  owner.  Originally, 
possession  by  the  creditor  of  the  thing  mortgaged  was  indispen- 

1 


2  PROPERTY  SECURITY  FOR  DEBT 

sable,  and  so  the  pignus  alone  existed;  but,  at  a  later  period,  the 
parties  to  the  transaction  were  permitted  to  choose  between  a 
pignus  and  a  hypotheca.  So  long  as  the  pignus  was  alone  in  use, 
it  is  obvious  that  the  obligation  could  be  created  only  by  the  act 
of  the  parties,  as  they  alone  could  change  the  possession  of  the 
property.  But  when  the  step  had  been  taken  of  permitting  the 
mere  agreement  of  the  parties  to  be  substituted  for  a  change  of 
possession,  it  was  another  easy  step  for  the  law,  whenever  it  saw 
fit,  to  substitute  its  own  will  for  the  agreement  of  the  parties;  and 
hence  hypothecations  came  to  be  divisible  into  such  as  were  created 
b}^  the  acts  of  the  parties  (conventional  hypothecations),  and 
such  as  were  created  by  the  act  of  the  law  (legal  or  tacit  hypothe- 
cations). Again,  so  long  as  a  change  of  possession  was  indispen- 
sable, it  is  plain  that  the  obligation  could  attach  only  upon  prop- 
erty which  was  perfectly  identified,  and  that  there  could  be  no 
change  in  the  property  subject  to  the  obligation,  except  by  a  new 
change  of  possession.  But  when  a  change  of  possession  had  been 
dispensed  with,  and  particularly  when  legal  or  tacit  hypothecations 
had  been  introduced,  it  became  perfectly  feasible  to  make  the 
obligation  attach  upon  all  property,  or  all  property  of  a  certain 
description,  either  then  belonging  to  the  debtor  or  afterward  ac- 
quired by  him,  or  upon  all  property,  or  all  property  of  a  certain 
description,  belonging  to  the  debtor  for  the  time  being;  and  hence 
hypothecations  came  to  be  divided  into  those  which  were  special 
and  those  which  were  general. 

The  pignus  has  passed  into  our  law  under  the  name  of  pawn,  oi- 
pledge,  as  to  things  movable,  but  has  been  wholly  rejected  as  to 
land.  The  conventional  hypotheca  has  been  wholly  rejected  by  our 
common  law,  though  it  has  passed  into  our  admiralty  law.  The 
legal  or  tacit  hypothecation,  on  the  other  hand,  has  been  admitted 
into  our  common  law  to  some  extent,  though  under  the  name  of 
lien  (a  word  which  has  the  same  meaning  and  the  same  derivation 
as  "obligation").  Thus,  by  the  early  statute  of  13  E.  I.,  c.  18,  a 
judgment  and  a  recognizance  (the  latter  being  an  acknowledgment 
of  a  debt  in  a  court  of  record,  of  which  acknowledgment  a  record 
is  made)  are  a  general  lien  on  all  the  land  of  the  judgment  debtor 
and  recognizor  respectively,  whether  then  owned  by  them  or  after- 
wards acquired.  So  also,  in  many  cases,  the  law  gives  to  a  creditor 
a  similar  lien  on  the  debtor's  movable  property,  already  in  the  cred- 
itor's possession  when  the  debt  accrues,  though,  in  respect  to  the 
creditor's  possession,  this  lien  has  the  features  of  a  pignus  rather 
than  of  a  hypotheca. 


PLEDGE   AND    HYPOTHECATION  6 

Glanville,  Lib.  X.,  c.  G  (Beames).  A  Loan  is  sometimes  made 
upon  the  Credit  of  a  putting  in  Pledge.  When  a  Loan  of  this  de- 
scription takes  place,  sometimes  moveables,  as  Chattels,  are  put  in 
pledge;  sometimes  immoveables,  as  Lands  and  Tenements,  and 
Rents,  whether  consisting  in  Money  or  in  other  things.  When 
a  Compact  is  made  between  a  Creditor  and  Debtor,  concerning  the 
putting  anything  in  pledge,  then,  whatever  be  the  mode  of  pledg- 
ing, the  Debtor  upon  his  receiving  the  thing  lent  to  him,  either 
immediately  delivers  possession  of  the  Pledge  (vadii  seisinam)  to 
the  Creditor,  or  not.  Sometimes  also  a  thing  is  pledged  for  a  cer- 
tain period,  sometimes  indefinitely.  Again,  sometimes  a  thing  is 
pledged  as  a  Mortgage  (in  mortuo  vadio),  sometimes  not.  A  pledge 
is  designated  by  the  term  Mortgage  when  the  fruits  and  Rents, 
which  are  received  in  the  interval,  in  no  measure  tend  to  reduce  the 
demand  for  which  the  pledge  has  been  given.  When,  therefore, 
moveables  are  put  in  pledge,  so  that  possession  be  delivered  to  the 
Creditor  for  a  certain  period,  he  is  bound  to  keep  the  pledge  safely, 
and  neither  to  use  it,  nor  in  any  other  manner  employ  it,  so  as  to 
render  it  of  less  Value.  But  should  it,  whilst  in  Custody  and  within 
the  Term,  suffer  deterioration,  by  the  fault  of  the  creditor,  a  Com- 
putation shall  be  made  to  the  extent  of  the  detriment  and  de- 
ducted from  the  Debt.  But  if  the  thing  be  of  such  a  description 
that  it  necessarily  requires  some  expense  and  cost,  for  Example, 
that  it  might  be  fed  or  repaired,  then  the  stipulation  of  the  parties 
on  that  subject  shall  be  abided  by.  In  addition — when  a  thing 
is  pledged  for  a  definite  period,  it  is  either  agreed  between  the 
Creditor  and  Debtor,  that  if,  at  the  time  appointed,  the  Debtor 
should  not  redeem  his  pledge,  it  should  then  belong  to  the  Creditor 
so  that  he  might  dispose  of  it  as  his  own;  or  no  such  agreement  is 
entered  into  between  them.  In  the  former  case,  the  Agreement 
must  be  adhered  to;  in  the  latter,  the  Term  being  unexpired  with- 
out the  Debtor's  discharging  the  Debt,  the  Creditor  may  complain 
of  him,  and  the  Debtor  shall  be  compelled  to  appear  in  Court, 
and  answer  by  the  following  Writ. 

c.  7.  "The  King  to  the  Sheriff,  Health:  Command  N.  that 
justly  and  without  delay,  he  redeem  such  a  thing  which  he  has 
pledged  to  R.  for  a,  hundred  Marks,  for  a  Term  which  is  past,  as  he 
says,  and  of  which  he  complains  that  he  has  not  redeemed  it;  and, 
unless  he  does  so,  &c." 

c.  8.  .  .  .  When  a  Compact  is  entered  into  between  a  Debtor 
and  Creditor,  concerning  the  pledging  of  a  particular  thing,  if  the 
Debtor,  after  having  received  the  Loan,  should  not  deliver  the 


4  PROPERTY  SECURITY  FOR  DEBT 

pledge,  it  may  be  asked,  what  step  should  the  Creditor  have  re- 
course  to  in  such  a  case,  especially  as  the  same  thing  may  l)e  pledged 
to  many  other  Creditors,  both  previously  and  subsequently?  Upon 
this  subject,  it  should  be  remarked,  that  the  King's  Court  is  not 
in  the  habit  of  giving  protection  to  or  warranting  private  Agree- 
ments of  this  description,  concerning  the  giving  or  accepting  things 
in  pledge,  or  others  of  this  kind,  made  out  of  Court,  or  even  in  any 
other  Court  than  that  of  the  King.  If,  therefore,  such  Compacts 
are  not  observed,  the  King's  Court  does  not  interfere;  and 
hence  it  is  not  bound  to  answer  concerning  the  right  of  diffei- 
ent  Creditors,  as  prior  or  subsequent,  or  respecting  their  privi- 
leges. 

But,  when  an  immoveable  thing  is  put  into  pledge,  and  Seisin  of 
it  has  been  delivered  to  the  Creditor  for  a  definite  term,  it  has 
either  been  agreed  between  the  Creditor  and  Debtor,  that  the  pro- 
ceeds and  rents  shall  in  the  meantime  reduce  the  Debt,  or  that  they 
shall  in  no  measure  be  so  applied.  The  former  Agreement  is  just 
and  binding;  the  other,  unjust  and  dishonest,  and  is  that  called 
a  IMortgage,  but  this  is  not  prohibited  by  the  King's  Court,  al- 
though it  considers  such  a  pledge  as  a  species  of  Usury.  Hence,  if 
any  one  die  having  such  a  pledge,  and  this  be  proved  after  his 
death,  his  property  shall  be  disposed  of  no  otherwise  than  as  the 
Effects  of  a  Usurer.  In  other  respects,  the  same  Rules  should  })e 
observed  as  in  pledges  of  moveables,  concerning  which  we  have 
already  spoken.  But  it  must  be  remarked,  that  if,  after  any  one 
has  paid  his  Debt,  or  has  in  a  proper  manner  tendered  it,  the 
Creditor  should  maliciously  detain  the  pledge,  the  Debtor  upon 
complaining  to  the  Court  shall  have  the  following  Writ: 

c.  9.  "The  King  to  the  Sheriff,  Health:  Command  N.  that 
justly  and  without  delay  he  render  to  R.  the  whole  Lands,  or  such 
Lands,  in  such  a  Vill,  which  he  has  pledged  to  him  for  a  Hundred 
Marks  for  a  term  which  is  past,  as  he  says,  and  has  received  his 
Money,  or  which  he  has  redeemed,  as  he  says;  and,  unless  he  does 
so.  Summon  him  by  good,  etc." 

c.  11.  If  the  Creditor  lose  his  Seisin,  either  by  means  of  the 
Debtor,  or  any  other  person,  he  cannot  recover  it  through  the  as- 
sistance of  the  Court;  not  even  by  a  Recognition  of  Novel  Dis- 
seisen.  For  if  he  was  unjustly  and  without  a  judgment  disseised 
of  his  pledge,  by  any  other  person  than  the  Debtor  himself,  the 
Debtor  may  have  an  Assise  of  Novel  Disseisin.  If,  however,  the 
Creditor  was  disseised  by  the  Debtor  himself,  the  Court  will  not 
assist  him  against  the  Debtor,  in  recovering  his  pledge,  or  in  giv- 


THE    COMMON    LAW    MORTGAGE  5 

ing  a  Re-entry,  unless  through  the  Debtor  himself;  for  the  Cred- 
itor should  resort  to  an  original  Plea  of  Debt,  in  order  that  the 
Debtor  may  be  compelled  to  render  him  satisfaction  for  his  Debt. 
In  such  case  the  debtor  shall  be  summoned  by  the  foregoing  Writ 
of  first  summons.^ 

(b)  The  Common  Law  Mortgage 

Lit.  §  332.  Of  Estates  upon  Condition.  Item,  if  a  feoffment 
be  made  upon  such  condition,  that  if  the  feoffor  pay  to  the  feoffee 
at  a  certain  day,  &c.,  40  pounds  of  money,  that  then  the  feoffor 
may  re-enter,  &c.;  in  this  case  the  feoffee  is  called  tenant  in  mor- 
gage,  which  is  as  much  to  say  in  French  as  7nort  gage,  and  in  Latin 
mortuum  vadium.  And  it  seemeth  that  the  cause  why  it  is  called 
morgage  is,  for  that  it  is  doubtful  whether  the  feoffor  will  pay  at 
the  day  hmited  such  sum  or  not:  and  if  he  doth  not  pay.  then  the 
land  which  is  put  in  pledge  upon  condition  foi-  the  payment  of  the 
money,  is  taken  from  him  forever,  and  so  dead  to  him  upon  con- 
dition, &c.  And  if  he  doth  pay  the  money,  then  the  pledge  is  dead 
as  to  the  tenant,  &c. 

§  333.  Also,  as  a  man  may  make  a  feoffment  in  fee  in  morgage, 
so  a  man  may  make  a  gift  in  tayle  in  morgage,  and  a  lease  for  te?-m 
of  life,  or  for  term  of  years  in  morgage.  And  all  such  tenants  are 
called  tenants  in  morgage,  according  to  the  estates  which  they 
have  in  the  land,  &c. 

§  334.  Also,  if  a  feoffment  be  made  in  morgage  upon  condition 
that  the  feoffor  shall  pay  such  a  sum  at  such  a  day,  &c..  as  is  be- 
tween them  by  their  deed  indented  agreed  and  limited,  although 
the  feoffor  dieth  l^efore  the  day  of  payment,  &c.,  yet  if  the  heir  of 
the  feoffor  pay  the  same  sum  of  money  at  the  same  day  to  the 
feoffee,  or  tender  to  him  the  money,  and  the  feoffee  refuse  to  re- 
ceive it,  then  may  the  heir  enter  into  the  land,  and  yet  the  condi- 
tion is,  that  if  the  feoffor  shall  pay  such  a  sum  at  such  a  day,  &c.. 
not  making  mention  in  the  condition  of  any  payment  to  be  made 
by  his  heir,  but  for  that  the  heir  hath  interest  of  right  in  the  condi- 
tion, &c..  and  the  intent  was  but  that  the  money  should  be  paid 
at  the  day  assessed,  &c.,  and  the  feoffee  hath  no  more  loss,  if  it  be 
paid  by  the  heir,  than  if  it  were  paid  by  the  father,  &c.;  therefore, 
if  the  heir  pay  the  money,  or  tender  the  money  at  the  day  limited. 
&c.,  and  the  other  refuse  it,  he  may  enter,  &c.  But  if  a  stranger 
of  his  own  head,  who  hath  not  any  interest,  &c.,  will  tender  the 

'  See,  also,  Spence,  Eq.  Juris.  601. 


6  PROPERTY    SECURITY    FOR    DEBT 

aforesaid  money  to  the  feoffee  at  the  day  appointed,  the  feoffee 
is  not  bound  to  receive  it. 

§  335.  And  be  it  remembered  that  in  such  ease,  where  such 
tender  of  the  money  is  made,  &c.,  and  the  feoffee  refuse  to  receive 
it,  by  which  the  feoffor  or  his  heirs  enter,  &c.,  then  the  feoffee 
hath  no  remedy  by  the  common  law  to  have  this  money,  because 
it  shall  be  accounted  his  own  folly  that  he  refused  the  money,  when 
a  lawful  tender  of  it  was  made  unto  him. 

§  337.  Also,  if  a  feoffment  be  made  upon  condition,  that  if  the 
feofTor  pay  a  certain  sum  of  money  to  the  feoffee,  then  it  shall  be 
lawful  to  the  feoffor  and  his  heirs  to  enter:  in  this  case  if  the  feoffor 
die  before  the  payment  made,  and  the  heir  will  tender  to  the 
feoffee  the  money,  such  tender  is  void,  because  the  time  within 
which  this  ought  to  be  done  is  passed.  For  when  the  condition  is, 
that  if  the  feoffor  pay  the  money  to  the  feoffee,  &c.,  this  is  as  much 
to  say,  as  if  the  feoffor  during  his  life  pay  the  money  to  the  feoffee, 
&c.,  and  when  the  feoffor  dieth,  then  the  time  of  the  tender  is 
passed.  But  otherwise  it  is  where  a  day  of  payment  is  limited, 
and  the  feoffor  die  before  the  day,  then  may  the  heir  tender  the 
money  as  is  afoi-esaid,  for  that  the  time  of  the  tender  was  not  passed 
by  the  de»ath  of  the  feoffor.  Also,  it  seemeth,  that  in  such  case 
where  the  feoffor  dieth  before  the  day  of  payment,  if  the  executors 
of  the  feoffor  tender  the  money  to  the  feoffee  at  the  day  of  payment, 
this  tender  is  good  enough;  and  if  the  feoffee  refuse  it,  the  heirs 
of  the  feoffor  may  enter,  &c.  And  the  reason  is,  for  that  the  execu- 
tors represent  the  person  of  their  testator,  &c. 

§  338.  And  note,  that  in  all  cases  of  condition  for  payment  of 
a  certain  sum  in  gross  touching  lands  or  tenements,  if  lawful  ten- 
der be  once  refused,  he  which  ought  to  tender  the  money  is  of  this 
quit,  and  fully  discharged  forever  afterwards. 

Co.  Lit.  209,  a,  b.  This  is  to  be  understood,  that  he  that  ought 
to  tender  the  money  is  of  this  discharged  forever  to  make  any  other 
tender;  but  if  it  were  a  duty  before,  though  the  feoffor  enter  by 
force  of  the  condition,  yet  the  debt  of  duty  remaineth.  As  if  A. 
borroweth  a  hundred  pounds  of  B.,  and  after  morgageth  land  to 
B.  upon  condition  for  pa3anent  thereof.  If  A.  tender  the  money 
to  B.  and  he  refuseth  it,  A.  may  enter  into  the  land,  and  the  land 
is  freed  forever  of  the  condition,  but  yet  the  debt  remaineth,  and 
may  be  recovered  by  action  of  debt.  But  if  A.  without  any  loan, 
debt  or  duty  preceding  infeoff  B.  of  land  upon  condition  for  the 
payment  of  a  hundred  pounds  to  B.  in  nature  of  a  gratuity  or  gift. 


THE    COMMON    LAW   MORTGAGE  7 

In  that  case  if  he  tender  the  hundred  pounds  to  him  according  to 
the  condition,  and  he  refuseth  it,  B.  hath  no  remedy  therefor,  and 
so  is  our  author  in  this  and  his  other  cases  of  Uke  nature  to  be  under- 
stood. 

Lit.  §  339.  Also,  if  the  feoffee  in  morgage  before  the  day  of  pay- 
ment which  should  be  made  to  him,  makes  his  executors  and  die, 
and  his  heir  entereth  into  the  land  as  he  ought,  &c.,  it  seemeth  in 
this  case  that  the  feoffor  ought  to  pay  the  money  at  the  day  ap- 
pointed to  the  executors,  and  not  to  the  heir  of  the  feoffee,  because 
the  money  at  the  beginning  trenched  to  the  feoffee  in  manner  as 
a  duty,  and  shall  be  intended  that  the  estate  was  made  by  reason 
of  the  lending  of  the  money  by  the  feoffee,  or  for  some  other  duty; 
and,  therefore,  the  payment  shall  not  be  made  to  the  heir,  as  it 
seemeth,  but  the  words  of  the  condition  may  be  such,  as  the  pay- 
ment shall  be  made  to  the  heir.  As  if  the  condition  were,  that  if 
the  feoffor  pay  to  the  feoffee  or  to  his  heirs  such  a  sum  at  such  a 
day,  &c.,  there  after  the  death  of  the  feoffee,  if  he  dieth  before  the 
day  limited,  the  payment  ought  to  be  made  to  the  heir  at  day  ap- 
pointed, &c. 

2  Blackstone,  Com.  157.  There  are  some  estates  defeasible 
upon  condition  subsequent,  that  require  a  more  peculiar  notice. 
Such  are: — 

Estates  held  m  vadio,  in  gage,  or  pledge,  which  are  of  two  kinds, 
vlvum  vadimn,  or  living  pledge,  and  mortuum  vadium,  dead  pledge, 
or  mortgage. 

Vivum  vadium,  or  living  pledge,  is  when  a  man  borrows  a  sum 
(suppose  £200)  of  another,  and  grants  him  an  estate,  as  of  £20 
per  annum,  to  hold  till  the  rents  and  profits  shall  repay  the  sum 
so  borrowed.  This  is  an  estate  conditioned  to  be  void,  as  soon  as 
such  sum  is  raised.  And  in  this  case  the  land  or  pledge  is  said  to 
be  living;  it  subsists,  and  survives  the  debt;  and  immediately  on 
the  discharge  of  that,  results  back  to  the  borrower.  But  mortuum 
vadium,  a  dead  pledge  or  mortgage  (which  is  much  more  common 
than  the  other),  is  where  a  man  borrows  of  another  a  specific  sum 
(e.  (jr.,  £200)  and  grants  him  an  estate  in  fee,  on  condition  that  if 
he,  the  mortgagor,  shall  repay  the  mortgagee  the  said  sum  of  £200 
on  a  certain  day  mentioned  in  the  deed,  that  then  the  mortgagor 
may  re-enter  on  the  estate  so  granted  in  pledge;  or,  as  is  now  the 
more  usual  way,  that  then  the  mortgagee  shall  reconvey  the  estate 
to  the  mortgagor.    In  this  case,  the  land,  which  is  so  put  in  pledge, 


8  PROPERTY  SECURITY  FOR  DEBT 

is  by  law,  in  case  of  non-payment  at  the  time  limited,  forever  dead 
and  gone  from  the  mortgagor;  and  the  mortgagee's  estate  in  the 
lands  is  then  no  longer  conditional,  but  absolute.^  Rut,  so  long  as 
it  continues  conditional,  that  is,  between  the  tmie  of  lending  the 
money  and  time  allotted  for  payment,  the  mortgagee  is  called 
tenant  in  mortgage.  But  as  it  was  formerly  a  doubt,  whethei-,  by 
taking  such  estate  in  fee,  it  did  not  become  liable  to  the  wife's 
dower  and  other  incumbrances  of  the  mortgagee  (though  that 
doubt  has  been  long  ago  overruled  by  our  courts  of  equitj'),  it, 
therefore,  became  usual  to  grant  only  a  long  term  of  years  by  way 
of  mortgage,  with  condition  to  be  void  on  repayment  of  the  mort- 
gage monej^  which  course  has  been  since  pretty  generally  contin- 
ued principally  because  on  the  death  of  the  mortgagee  such  term 
becomes  vested  in  his  personal  representatives,  who  alone  are  en- 
titled in  equity  to  receive  the  money  lent,  whatever  nature  the 
mortgage  may  happen  to  be. 

As  soon  as  the  estate  is  created,  the  mortgagee  may  immediately 
enter  upon  the  lands;  but  is  liable  to  be  dispossessed,  upon  per- 
formance of  the  condition  by  pajTnent  of  the  mortgage  mone}'  at 
the  day  limited.  And,  therefore,  the  usual  way  is  to  agree  that  the 
mortgagor  shall  hold  the  land  till  the  day  assigned  for  payment; 
when,  in  case  of  failure,  whereby  the  estate  becomes  absolute,  the 
mortgagee  maj^  enter  upon  it  and  take  possession,  without  any 
possibility  at  law  of  being  afterward  evicted  by  the  mortgagor,  to 
whom  the  land  is  now  forever  dead.  But  here  again  the  courts  of 
equity  interpose,  and  though  a  mortgage  be  thus  forfeited,  and  the 
estate  absolutely  vested  in  the  mortgagee  at  the  common  law,  yet 
they  will  consider  the  real  value  of  the  tenements  compared  with 
the  sum  borrowed.  And,  if  the  estate  be  of  greater  value  than  the 
sum  lent  thereon,  they  will  allow  the  mortgagor  at  any  reasonable 
time  to  recall  or  redeem  his  estate;  paying  to  the  mortgagee  his 
principal,  interest  and  expenses;  for  otherwise,  in  strictness  of 
law,  an  estate  worth. £1000  might  be  forfeited  for  non-payment  of 
£100,  or  a  less  sum.  This  reasonable  advantage,  allowed  to  mort- 
gagors, is  called  the  equity  of  redemption;  and  this  enables  a  mort- 
gagor to  call  on  the  mortgagee  who  has  possession  of  his  estate,  to 
deliver  it  back  and  account  for  the  rents  and  profits  received,  on 
payment  of  his  whole  debt  and  interest;  thereby  turning  the 
morfuum  into  a  kind  of  vimim  vadium.  But  on  the  other  hand,  the 
mortgagee  may  either  compel  the  sale  of  the  estate  in  order  to  get 
the  whole  of  his  money  immediately,  or  else  call  upon  the  mort- 
1  But  see,  Coote  on  Mortgage,  5,  9. 


THE    COMMON   LAW    MORTGAGE  \f 

gaeor  to  redeem  his  estate  presently,  or  in  default  thereof,  to  he 
forever  foreclosed  from  redeeming  the  same;  that  is,  to  lose  his 
equity  of  redemption  without  possibility  of  recall.     And  also,  m 
some  cases  of  fraudulent  mortgages,  the  fraudulent  mortgagor 
forfeits  all  equity  of  redemption  whatsoever.     It  is  not,  however, 
usual  for  mortgagees  to  take  possession  of  the  mortgaged  estate  un- 
less where  the  security  is  precarious,  or  small;  or  where  the  mort- 
gagor neglects  even  the  paj-ment  of  interest;  when  the  mortgagee 
is  frequently  ol)liged  to  bring  an  ejectment,  and  take  the  land  into 
his  own  hands  in  the  nature  of  a  pledge,  or  the  pignus  of  the  Roman 
law;  whereas,  while  it  remains  in  the  hands  of  the  mortgagor,  it 
more  resembles  their  hijpotheca,  which  was,  where  the  possession 
of  the  thing  pledged  remained  with  the  debtor.    But  by  statute  7 
Geo.  II.,  c.  20,  after  payment  or  tender  by  the  mortgagor  of  prin- 
cipal, interest  and  costs,  the  mortgagee  can  maintain  no  ejectment, 
but  may  be  compelled  to  re-assign  his  security.    In  Glanvil's  time, 
when  the  universal  method  of  conveyance  was  by  hvery  of  seisin  or 
corporal  tradition  of  the  lands,  no  gage  or  pledge  of  lands  was 
good  unless  possession  was  also  delivered  to  the  creditor:  "Si  nan 
sequatur  ipsius  vadii  traditio,  curia  domini  regis  hujusmndi  privates 
ccnventiones  tueri  non  solet;''  for  which  the  reason  given  is,  to  pre- 
vent subsequent  and  fraudulent  pledges  of  the  same  land,  "Cum 
in  tali  casu  posdt  eodem  res  pluribus  aliis  creditoribus  turn  prius 
turn  posterius  invadiari."    And  the  frauds  which  have  arisen,  since 
the  exchange  of  these  public  and  notorious  conveyances  for  more 
private  and  secret  bargains,  have  well  evinced  the  wisdom  of  our 
ancient  law. 

4  Kent,  Com.  140.  The  law  of  pledges  shows  an  accurate  and 
refined  sense  of  justice;  and  the  wisdom  of  the  provisions  by  which 
the  interests  of  the  debtor  and  creditor  are  equally  guarded,  is  to 
be  traced  to  the  Roman  law,  and  shines  with  almost  equal 
advantage,  and  with  the  most  attractive  simplicity,  in  the  pages 
of  Glanville. 

It  forms  a  striking  contrast  to  the  common-law  mortgage  of  the 
freehold,  which  was  a  feoffment  upon  condition,  or  the  creation  of 
a  base  or  determinable  fee,  with  a  right  of  reverter  attached  to  it. 
The  legal  estate  vested  immediately  in  the  feoffee,  and  a  mere  right 
of  re-entiy,  upon  performance  of  the  condition,  by  payment  of  the 
debt  strictly  at  the  day,  remained  with  the  mortgagor  and  his  heirs, 
and  which  right  of  entry  was  neither  alienable  nor  devisable.  If 
the  mortgagor  was  in  default,  the  condition  was  forfeited,  and  the 


10  PROPERTY  SECURITY  FOR  DEBT 

estate  became  absolute  in  the  mortgagee,  without  the  right  or  the 
hope  of  redemption.  So  rigorous  a  doctrine,  and  productive  of  such 
forbidding,  and,  as  it  eventually  proved,  of  such  intolerable  injus- 
tice, naturally  led  to  exact  and  scrupulous  regulations  concerning; 
the  time,  mode,  and  manner  of  performing  the  condition,  and  thev 
became  all- important  to  the  mortgagor.  The  tender  of  the  debt 
was  required  to  be  at  the  time  and  place  prescribed;  and  if  there 
was  no  place  mentioned  in  the  contract,  the  mortgagor  was  bound 
to  seek  the  mortgagee,  and  a  tender  upon  the  land  was  not  suffi- 
cient. If  there  was  no  time  of  payment  mentioned,  the  mortgagor 
had  his  whole  lifetime  to  pay,  unless  he  was  quickened  by  a  de- 
mand ;  but  if  he  died  before  the  payment,  the  heir  could  not  tender 
and  save  the  forfeiture,  because  the  time  was  passed.  If,  however, 
the  money  was  declared  to  be  payable  by  the  mortgagor,  or  his 
heirs,  then  the  tender  might  be  made  by  them  at  any  time  indefi- 
nitely after  the  mortgagor's  death,  unless  the  performance  was 
hastened  by  request;  and  if  a  time  for  pajonent  was  fixed,  and  the 
mortgagor  died  in  the  meantime,  his  heir  might  redeem,  though 
he  was  not  mentioned,  for  he  had  an  interest  in  the  condition.  If 
the  representatives  of  the  mortgagee  were  mentioned  in  the  feoff- 
ment, whether  they  were  heirs,  executors,  or  assignees,  the  pay- 
ment could  rightfully  be  made  to  either  of  them.^ 

Id.  158.  In  ascending  to  the  view  of  a  mortgage  in  the  contem- 
plation of  a  court  of  equity,  we  leave  all  these  technical  scruples  and 
difficulties  behind  us.  Not  only  the  original  severity  of  the  com- 
mon law,  treating  the  mortgagor's  interest  as  resting  upon  the 
exact  performance  of  a  condition,  and  holding  the  forfeiture  or 
the  breach  of  a  condition  to  be  absolute,  by  non-payment  or  tender 
at  the  day,  is  entirely  relaxed;  but  the  narrow  and  precarious  char- 
acter of  the  mortgagor  at  law  is  changed,  under  the  more  enlarged 
and  liberal  jurisdiction  of  the  courts  of  equity.  Their  influence  has 
reached  the  courts  of  law,  and  the  case  of  mortgages  is  one  of  the 
most  splendid  instances  in  the  history  of  our  jurisprudence,  of  the 
triumph  of  equitable  principles  over  technical  rules,  and  of  the 
homage  which  those  principles  have  received  by  their  adoption 

^Goodall's   case,    5    Co.    95;    Co.  not  been  incurred  by  reason  of  non- 

Litt.  210.    This  case  of  Goodall,  and  payment  at  the  day.     Such  a  ques- 

Wade's  case,  5  Co.  114,  are  samples  tion,  which  would  now  be  only  ma- 

of  the  discussions  on  what  was,  in  terial  as  to  ,the  costs,  was  in  one  of 

thetimeof  Lord  Coke,  a  very  momen-  those  cases  decided,  on  error  from 

tous  question,  whether  the  absolute  the  K.  B.,  after  argument  and  debate, 

forfeiture  of  the  estate  had  or  had  by  all  the  judges  of  England. — Kent. 


THE   COMMON   LAW   MORTGAGE  11 

in  the  courts  of  law.  Without  any  prophetic  anticipation,  we  may 
well  say,  that  "  returniii<;  justice  lifts  aloft  her  scale."  The  doctrine, 
now  regarded  as  a  settled  principle,  was  laid  down  in  the  reign  of 
Charles  I.,  very  cautiously,  and  with  a  scrupulousness  of  opinion. 
"The  Court  conceived,  as  it  was  observed  in  chancery,  that  the 
said  lease  being  but  a  security,  and  the  money  paid,  though  not  at 
the  day,  the  lease  ought  to  be  void  in  equity."  ^  The  equity  of 
redemption  grew  in  time  to  be  such  a  favorite  with  the  courts  of 
equity,  and  was  so  highly  cherished  and  protected,  that  it  became 
a  maxim,  that  "once  a  mortgage,  always  a  mortgage."  The  ob- 
ject of  the  rule  is  to  prevent  oppression;  and  contracts  made  with 
the  mortgagor,  to  lessen,  embarrass  or  restrain  the  right  of  re- 
demption, are  regarded  with  jealousy,  and  generally  set  aside  as 
dangerous  agreements,  founded  in  unconscientious  advantages 
assumed  over  the  necessities  of  the  mortgagor.  ... 

The  equity  doctrine  is,  that  the  mortgage  is  a  mere  security  for 
the  debt,  and  only  a  chattel  interest,  and  that  until  a  decree  of 
foreclosure,  the  mortgagor  continues  the  real  owner  of  the  fee.  The 
equity  of  redemption  is  considered  to  be  the  real  and  beneficial 
estate,  tantamount  to  the  fee  at  law;  and  it  is  accordingly  held 
to  be  descendible  by  inheritance,  devisable  by  will,  and  alienable 
by  deed,  precisely  as  if  it  were  an  absolute  estate  of  inheritance  at 
law.^  The  courts  of  law  have,  also,  by  a  gradual  and  almost  in- 
sensible progress,  adopted  these  equitable  views  of  the  subject, 
which  are  founded  in  justice,  and  accord  with  the  true  intent  and 
inherent  nature  of  every  such  transaction.  Except  as  against  the 
mortgagee,  the  mortgagor,  while  in  possession,  and  before  fore- 
closure, is  regarded  as  the  real  owner,  and  a  freeholder,  with  the 
civil  and  political  rights  belonging  to  that  character;  whereas  the 
mortgagee,  notwithstanding  the  form  of  the  conveyance,  has  only  a 
chattel  interest,  and  his  mortgage  is  a  mere  security  for  a  debt. 

1  Emmanuel  College  v.  Evans,  1  of  this  equity  of  redemption.  By 
Rep.  in  Ch.  10.  In  the  case  of  the  growth  of  equity,  the  heart  of 
Roscarrick  v.  Barton,  1  Cases  in  Ch.  the  common  law  was  eaten  out.  He 
217,  Sir  Matthew  Hale,  wnen  chief-  complained  that  an  equity  of  re- 
justice,  showed  that  he  had  not  risen  demption  was  transferable  from  one 
above  the  mists  and  prejudices  of  to  another,  though  at  common  law  a 
his  age  on  this  subject,  for  he  com-  feoffment  or  fine  would  have  ext in- 
plained  very  severely  of  the  growth  guished  it;  and  he  declared  he  would 
of  equities  of  redemption,  as  having  not  favor  the  equity  of  redemption 
been  too  much  favored,  and  been  beyond  existing  precedents. — Kent. 
carried  too  far.  In  14  Rich.  II.,  the  *  1  Vern.  7,  232,  and  2  Vent.  364.— 
Parliament,  he  said,  would  not  admit  Kent. 


12 


PROPERTY  SECURITY  FOR  DEBT 


^^/ 


This  is  the  conchision  to  be  drawn  from  a  view  of  the  English  and 
American  authorities,^ 

Trowbridgp:,  Reading  on  Mortgages,  8  Mass.  Rep.  551. 
Among  conditional  estates  are  mortgages  of  land  and  tenements. 
These  are  sometimes  of  the  freehold  and  inheritance,  and  some- 
times for  a  teim  of  j-ears  only. 

1.  Of  the  freehold  and  inheritance:  Where  a  feoffment  is  made 
upon  condition,  that  if  the  feoffor  pay  the  feoffee  £40  at  a  certain 
day,  then  he  shall  re-enter,  &c.  Here  the  land  and  all  the  feoffor's 
estate  in  it  pass  presently  to  the  feoffee  by  common  law;  and  the 
feoffor  has  only  the  condition  left,  and  no  estate  in  the  land  that  he 
can  assign  over  (Co.  Lit.  205  a,  210  a).  So  if  one  here,  by  deed 
duly  acknowledged  and  registered,  conveys  his  land  to  another  and 
his  heirs  upon  the  like  condition,  the  land  and  all  the  mortgagor's 
estate  in  it  pass  presently  to  the  mortgagee  by  force  of  the  provin- 
cial act  of  9  Will.  3,  c.  7  (1  P.  Will.  74).  .  .  . 

It  is  objected  to  this  doctrine,  that  Lord  Mansfield,  in  consider- 
ing what  species  of  property  a  mortgagee  has  in  the  estate  mort- 
gaged, lately  said  (2  Burr.  978,  979),  that  "a  mortgage  is  a  charge 
upon  the  land,  and  whatever  would  give  the  money,  will  carry  the 
estate  in  the  land  along  with  it,  to  every  purpose.  The  estate  in 
the  land  is  the  same  thing  as  the  money  due  upon  it.  It  will  be 
liable  to  debts;  it  will  go  to  executors;  it  will  pass  by  a  will  not 
made  and  executed  with  the  solemnities  required  by  the  statute  of 
frauds.  The  assignment  of  the  debt,  or  forgiving  it,  will  draw  the 
land  after  it,  as  a  consequence,  nay,  it  would  do  it  though  the  debt 
were  forgiven  only  by  parole;  for  the  right  to  the  land  would 
follow,  notwithstanding  the  statute  of  frauds"  (3  Cha.  Rep.  3) 


1  The  King  v.  St.  Michaels,  Doug. 
630;  The  King  v.  Edington,  1  East 
288;  Jackson  v.  Willard,  4  Johns.  41 
Runyan  v.  Mersereau,   11  ibid.  534 
Huntington  v.  Smith,  4  Conn.  235 
Willington    v.    Gale,    7    Mass.    138 
M'Call  V.  Lennox,  9  Serg.  &  Rawle 
302;  Ford  v.  Philpot,  5  Harr.  &  Johns 
312;  Wilson  v.  Troup,  2  Cowen,  195 
Eaton    V.     Whiting,    3    Pick.     484 
Blaney    v.    Bearce,    2    Greenl.    132. 
The  growth  and  consolidation  of  the 
American  doctrine,   that  until  fore- 
closure the  mortgagor  remains  seised 
of  the  freehold,  and  that  the  mort- 
gagee has,  in  effect,  but  a  chattel  in- 


terest, and  that  it  goes  to  the  execu 
tor,  as  personal  assets,  and  though, 
technically  speaking,  the  fee  de- 
scends to  the  heir,  yet  he  is  but  a 
trustee  for  the  personal  representa- 
tives, and  need  not  be  a  party  to  a 
bill  by  the  executor  for  a  foreclosure, 
was  fully  shown  and  ably  illustrated 
by  the  Chief-Justice  of  Connecticut, 
in  Clark  v.  Beach,  6  Conn.  142,  and 
by  the  Chief-Justice  of  Maine,  in 
Wilkins  v.  French,  20  Maine,  111; 
and  by  the  Chancellor  of  New  Jersey, 
in  Kinna  v.  Smith,  2  Green,  14;  and 
these  general  principles  were  not 
questioned  by  the  courts.— Xen^.      / 


A 


THE    COMMON    LAW   MORTGAGE  13 

Upon  this  authoi'ity  it  is  said  tiiat  the  nioi'tgagee  has  no  legal 
estate  in  the  land;  that  all  mortgages  are  peisonal  estate;  and  if 
the  land  is  not  redeemed  nor  redeemable,  the  judge  of  pi-obate  has 
a  right  to  assign  to  the  widow,  where  there  aic  chihhen,  a  third, 
and  where  there  are  none,  half  the  land,  to  hold,  not  during  life, 
l^ut  forever,  in  fee.  .  .  . 

In  order  the  better  to  settle  the  authority  of  these  propositions, 
said  to  have  fallen  from  Lord  Mansfield,  it  may  not  be  amiss,  first 
to  consider  the  third  proposition,  viz.:  "that  the  estate  in  the  land 
is  the  same  thing  as  the  money  due  upon  it;"  as  it  may  serve  to 
illustrate  the  rest,  and  show  what  is  intended  to  be  implied  in  some 
or  all  of  them. 

If  the  mortgagee's  estate  in  the  land  is  the  same  thing  as  the 
money  due  upon  it,  then  the  money  due  upon  the  land  is  the  mort- 
gagee's estate  in  it;  and  consequently  there  is  no  difference  between 
the  mortgage  of  land  for  a  term  only,  and  a  mortgage  of  it  in  fee, 
if  it  be  for  the  same  sum;  the  money,  which  is  the  estate  in  the 
land,  being  exactly  the  same  in  both  cases;  and  the  mortgagee  in 
fee  has  no  other  nor  greater  estate  in  the  land  than  the  mortgagee 
of  a  term  only  hath.  This  proposition,  if  true,  when  taken  accord- 
ing to  the  words  of  it,  without  restriction  or  limitation,  at  once 
destroys  the  distinction  between  the  vadium  vivum  and  the  vadium 
morhium.  It  renders  idle  the  invention  and  substitution  of  mort- 
gages for  a  term  instead  of  mortgages  in  fee,  and  tends  to  prove 
that  the  mortgagee  has  no  estate,  according  to  the  legal  sense  of 
words,  in  the  land.  But  surely  Lord  Mansfield  did  not  so  under- 
stand the  proposition;  for  in  that  which  immediateh'  precedes  it, 
he  plainly  distinguishes  between  the  money  and  the  estate  in  the 
land,  and  so  he  doth  in  those  which  follow.  In  the  same  case  he 
just  before  says,  that  if  it  appeared  that  the  testator  really  meant 
and  intended  to  devise  the  close  as  land,  it  would  be  a  devise  of 
the  land,  the  mortgage  being  forfeited  by  law,  and  the  estate  in  the 
land  having  become  absolute.  What,  was  the  money  become  abso- 
lute? No,  surely.  His  lordship  meant,  that  the  conditional  fee 
.simple  which  the  mortgagee  had  in  the  close  by  the  non-payment 
of  the  money  by  the  day.  had  become  an  absolute  fee  simple  in 
law;  so  that  he  might  devise  the  land  to  his  son  and  daughter  in 
fee  tail;  and  if  that  was  his  intent  in  the  will,  the  close  would  pass 
aecordingl}^  as  an  estate  of  inheritance  in  fee  tail  so  long  as  it 
continued,  which  would  be  until  it  was  redeemed,  or  the  estate 
tail  was  spent,  agreeably  to  what  Lord  Keeper  Wright  said  in  Gilb. 
Eq.  Ca.  3,  in  the  case  of  a  mortgage  in  fee. 


14  PROPERTY  SECURITY  FOR  DEBT 

The  money  due  on  the  mortgage  could  not,  by  Lord  Mansfield, 
be  considered  as  the  estate  in  the  land,  so  as  to  make  the  money 
real  estate,  nor  the  estate  in  the  land  money,  so  as  to  make  an 
estate  in  fee  in  land  or  the  land  itself  personal  estate.  His  lordship 
doubtless  well  knew  there  was  a  difference  between  a  mortgage  of 
land  for  a  term  only  and  a  mortgage  in  fee:  That  the  former  was 
but  a  chattel  and  the  latter  an  estate  of  inheritance;  that  the  for- 
mer, unless  dependent  upon  the  inheritance,  was  legal  assets,  and 
the  latter  equitable  assets  only;  that  the  former  went  directly  to 
the  executor,  &c.,  but  the  latter  descended  to  the  heir,  and  the 
executor  could  not  have  the  land  without  the  aid  of  the  Court  of 
Chancery.  And  yet  the  several  propositions,  as  they  stand,  con- 
found mortgages  for  a  term  and  mortgages  in  fee  together;  as 
though  there  was  no  difference  between  them,  which  is  not  reason- 
able to  suppose  Lord  Mansfield  ever  did;  and,  therefore,  it  must 
be  supposed  the  reporter  did  not  take  down  the  restrictions,  with 
which  his  lordship  qualified  his  propositions,  and  left  them  to  be 
implied  by  the  reader.  .  .  . 

For  if  the  mortgagor  in  fee  shall,  after  the  day  of  payment  is 
elapsed,  pay  the  mortgage  money  to  the  mortgagee,  it  doth  not 
revest  the  fee  in  him  in  law,  nor  even  in  equity;  because  the  mort- 
gagee is  deemed  in  such  a  case  by  the  Court  of  Chancery  a  trustee  of 
the  mortgagor,  &c.,  until  the  estate  is  reconveyed;  and  so  is  a  vendor 
-after  a  contract  to  convey,  and  the  land,  though  not  conveyed,  will 
in  equity  pass  by  the  will  of  the  vendee  as  his  land  (3  Chan.  Rep.  3). 
And  surely,  forgiving  the  debt  will  not  vest  the  estate  in  the  mort- 
gagor, more  than  payment  of  the  mortgage  money.  Nay,  where 
mortgages  are  devised  to  executors,  upon  payment  of  the  money 
to  them,  the  heir  is  decreed  to  join  in  the  reconveyance.  .  .  . 

Upon  the  whole  the  futility  of  the  allegations,  "that  mortgages 
are  personal  estate,  that  a  mortgagee  has  no  estate  in  the  land, 
and  that  the  land  mortgaged,  even  after  it  has  become  irredeem- 
able, may  be  distributed  by  the  judge  of  probate  as  personal  es- 
tate," is  evident.  .  .  . 

Authorities  showing'  the  estate,  both  legal  and  equitable,  to  be 
in  the  mortgagee:  2  Atk.  352-4;  2  Cha.  Ca.  97;  1  Cha.  Ca.  285.^ 

^  "  If  the  estate  on  which  a  pauper  a  chattel,  and  the  mortgage  is 
resides  is  substantially  his  property,  only  a  security.  It  is  an  affront 
that  is  sufficient  whatever  forms  of  to  common-sense  to  say  the  mort- 
conveyance  there  may  be;  and  there-  gagor  is  not  the  real  owner.  ..." 
fore  a  mortgagor  in  possession  gains  — Per  Lord  Mansfield,  in  The 
a  settlement,  because  the  mortgagee,  King  v.  St.  Michaels,  Doug.  632 
notwithstanding  the  form,   has  but       (1781). 


BURGH    V.    FRANCIS  15- 

(c)   The  Equitable  Mortgage 

BURGH  V.  FRANCIS 

Court  of  Chancery,  1673 

(Rep.  temp.  Finch,  28) 

This  bill  was  brought  by  the  executors  of  the  mortgagee  against 
the  heir  of  the  mortgagor,  to  perfect  a  defective  deed  of  mortgage 
by  feoffment,  without  livery  and  seisin,  and  to  be  relieved  against 
certain  judgments  confessed  by  the  defendant  Henry  Francis,  and 
by  Sherrer  and  his  wife,  by  collusion  to  defeat  the  plaintiffs. 

The  defendants  acknowledge  by  their  answers,  that  they  had 
confessed  several  judgments  all  in  one  term,  and  most  of  them  at 
the  same  time,  and  to  several  persons  for  considerable  sums  of 
money,  which  they  set  forth,  but  deny  they  were  since  the  Ijill 
exhibited,  tho'  they  cannot  tell  when  the  warrants  of  attorney 
were  sealed. 

This  cause  being  heard  by  the  Lord  Keeper  Bridgm.\n,  he  di- 
rected the  matter  to  be  examined  before  a  master,  and  more  par- 
ticularly whether  the  bill  was  a  new  or  an  amended  bill,  and  when 
the  judgments  were  obtained,  and  when  the  warrants  of  attorney 
were  dated  and  sealed,  and  whether  the  judgments  were  confessed 
after  the  bill,  and  after  notice  of  the  mortgage;  and  after  the  mas- 
ter had  made  his  report,  he  would  give  his  opinion,  &c. ;  the  cause 
was  reheard  by  the  Lord  Shaftsbury,  and  an  accommodation 
proposed,  which  took  no  effect,  and  being  now  reheard  by  the 
Lord  Keeper  Finch,  he  decreed  that  the  plaintiffs  should  be 
relieved,  and  that  the  several  judgments  ought  not  to  incumber 
the  mortgaged  premises,  until  the  mortgage  money  was  all  paid. 

This  decree  was  not  founded  on  the  manner  of  obtaining  these 
judgments,  nor  on  the  special  way  by  which  they  were  endeavored 
to  charge  the  lands,  viz.,  by  pleading  that  the  heir  had  nothing  by 
descent  besides  the  lands  in  mortgage,  nor  upon  the  priority  of  the 
teste  of  the  subpoena,  which  was  before  the  teste  of  the  originals 
upon  which  the  judgments  were  had,  but  it  was  founded  on  the 
nature  of  the  case. 

For  the  debt  due  upon  this  mortgage  did  originally  charge  the 
land  which  the  debts  by  bond  did  not,  till  they  were  reduced  into 
judgments;  and  altho'  the  mortgage  was  defective  in  point  of 
law  for  want  of  livery,  yet  equity,  which  supplies  that  defect,  did 
still  charge  the  land,  and  it  ought  not  to  be  in  the  power  of  the 


16  PROPERTY  SECURITY  FOR  DEBT 

heir  at  law  to  charge  it,  by  acknowledging  judgments  in  prejudice 
to  such  equity;  the  rather,  because  in  this  cause  it  appeared,  that 
the  mortgagor  had  covenanted  for  him  and  his  heirs,  to  make  any 
farther  assurance;  so  that  when  the  land  descends  upon  the  heir 
charged  with  this  mortgage,  he  is  in  nature  of  a  trustee  for  the 
mortgagee  till  the  money  is  paid,  and  cannot  incumber  it;  and 
tho  the  creditors  had  not  any  notice  of  this  mortgage,  yet  they 
shall  be  bound  in  this  case,  because  they  are  not  put  in  a  worse 
condition  than  they  ought  to  be,  viz.,  to  be  postponed  to  the  mort- 
gage; and  it  appeared  in  proof,  that  the  heir  once  offered  to  pay  the 
mortgage  money,  but  upon  sight  of  the  defec^t  of  the  deed  he  re- 
fused, and  presently  acknowledged  all  those  judgments  on  bonds, 
on  purpose  to  load  the  land  with  incumbrances,  and  in  effect  to  pay 
his  father's  debts  with  the  money  due  on  the  mortgage. 

Wherefore  the  decree  was,  that  the  defendant  Henry  Francis, 
who  was  to  be  heir  at  law,  shall  convey  to  the  plaintiffs,  or  to  such 
whom  he  shall  appoint,  a  sufficient  and  perfect  estate  of  inheritance 
in  the  premises,  in  such  manner  as  the  master  shall  direct,  subject 
to  be  redeemed  upon  the  payment  of  the  principal  and  interest  due 
on  the  former  defective  deed,  and  the  said  lands  shall  be  held  as 
mortgaged,  and  be  quietly  enjoyed  against  the  defendants,  and  all 
claiming  under  them  since  the  date  of  the  former  mortgage;  and 
that  he,  to  whom  the  redemption  doth  belong,  may  exhibit  his  bill 
in  convenient  time,  or  in  default  thereof  the  plaintiff  may  exhibit 
his  bill  to  foreclose. 

And  a  perpetual  injunction  was  awarded  to  quiet  the  plaintiff's 
possession  against  all  the  said  defendants,  and  to  stay  all  proceed- 
ings at  law,  but  no  costs  until  redemption,  or  the  plaintiff  enforced 
to  exhibit  his  bill  to  foreclose,  and  then  costs  to  be  allowed  as  in 
such  cases. 

SIR  SIMEON  STEWART'S  CASE 

Court  of  Chancery 

(2  Sch.  &  Lef.  381) 

The  late  Sir  Simeon  Stewart  being  embarrassed  in  his  affairs, 
made  a  conveyance  to  the  late  Lord  Delaware,  Sir  H.  Tichborne, 
and  others,  in  trust,  for  the  payment  of  his  debts.  Previous  to 
executing  that  conveyance,  a  gentleman  of  the  name  of  Willis  had 
been  prevailed  on  by  Sir  Simeon  Stewart  to  lend  him  a  large  sum 
of  money;  and  Sir  Simeon  wrote  him  a  letter,  in  which  he  stated 


SIR   SIMEON    STEWART  S   CASE 


that  he  would  make  a  mortgage  to  him  on  some  part  of  his  Hamp- 
shire estate;  '  and  the  question  was,  whether  that  was  a  contract 
which  bound  the  trustees,  who  were  trustees  for  general  creditors. 
The  creditois  insisted  they  were  purchasers  for  valuable  considera- 
tion, without  notice  of  this  contract.  The  fact  of  notice  could  not 
be  brought  home  to  the  creditors;  but  it  was  sufficiently  established 
that  the  persons  who  prepared  the  trust  deeds,  and  were  therefore 
the  agents  of  the  creditors  and  the  trustees  in  that  transaction,  had 
full  notice:  and  therefore  the  only  question  was,  whether  this  bound 
the  estate  in  the  hands  of  the  trustees,  as  being  an  equity  affecting 
Sir  Simeon  Stewart,  prior  to  his  conveyance;  for  if  it  bound  him, 
the  consequence  would  be  that  it  bound  his  trustees,  under  the  cir- 
cumstances of  that  deed.  The  Court  did  determine  that  the  letter 
was  sufficient  to  bind  him. — Per  Redesdale,  L.  Ch.,  in  Card  v. 
Jaffray,  2  Sch.  &  Lef.  374  (1805).- 


1  In  Payne  v.  Wilson,  74  N.  Y.  348 
(1878),  held,  an  agreement  to  give  a 
mortgage  on  one  of  several  hou-ses 
then  being  erected,  without  point- 
ing out  the  particular  house,  created 
an  equitable  mortgage,  "though  in- 
definite to  some  degree;"  citing  the 
principal  case.  See,  also,  Johnson  v. 
Johnson,  40  Md.  189  (1874). 

-  "The  doctrine  seems  to  be  well 
estabUshed  that  an  agreement  in 
writing  to  give  a  mortgage,  or  a 
mortgage  defectively  executed,  or  an 
imperfect  attempt  to  create  a  mort- 
gage, or  to  appropriate  specific  prop- 
erty to  the  discharge  of  a  particular 
debt,  will  create  a  mortgage  in  equitj-, 
or  a  specific  lien  on  the  property  so 
intended  to  be  mortgaged  (1  Am. 
Lead.  Cas.  in  Eq.  510;  Howe's  Case, 
1  Paige,  12.5).  The  maxim  of  equity 
upon  which  this  doctrine  rests  is, 
that  equity  looks  upon  things  agreed 
to  be  done  as  actually  performed; 
the  true  meaning  of  which  is   that 


equity  will  treat  the  .subject-matter 
as  to  collateral  consequences  and 
incidents  in  the  same  manner  as  if 
the  final  acts  contemplated  by  the 
parties  had  been  executed  exact ly 
as  they  ought  to  have  been  (Story, 
Eq.  Jur.,  sees.  64  and  790;  Will. 
Eq.  Jur.  289,  299)."— Per  CfRRY, 
Ch.  J.,  in  Daggett  v.  Rankin,  31  Cal. 
321  (1866). 

See  also,  Fnllerton  v.  Provincial 
Bank  of  Ireland,  L.  R.  [1903]  A.  C. 
309,  as  to  the  nature  of  equitable 
mortgages. 

In  Bridgeport  Ice  Co.  v.  Meader, 
72  Fed.  11.5  (1895),  the  United  States 
Circuit  Court  of  Appeals  said:  "It 
is  well  settled  that  an  agreement  to 
give  a  mortgage,  for  a  valuable  con- 
sideration, upon  property  which  is 
sufficiently  specified,  is  in  a  court  of 
equity  regarded  as  the  creation  of  the 
mortgage  itself.  This  is  held,  for 
the  rea.son  that  equity  will  treat  that 
as  done  which  ought  to  be  done." 


BOOK  II 
ESSENTIAL  ELEMENTS   OF   MORTGAGE 

CHAPTER  I 

CONVEYANCE 

Section  I. — Mortgage,  Pledge  and  Lien 

FRANKLIN  v.   NEATE 

Court  of  Exchequer,  1844 

(13  M.  &  W.  481) 

This  was  an  action  of  trover  for  a  chronometer;  to  which  the  de- 
fendant pleaded,  first,  not  guilty;  secondly,  that  the  plaintiff  was 
not  possessed  of  the  chattel. 

At  the  trial,  before  Parke,  B.,  at  the  Middlesex  sittings  in  last 
Trinity  Term,  it  appeared  that  the  chronometer  for  which  the  ac- 
tion was  brought  had  been  pledged,  by  a  person  named  Gilbert,  to 
the  defendant,  a  pawnbroker,  under  a  written  agreement  that  it 
was  deposited  as  a  collateral  security  for  the  sum  of  £15,  and  inter- 
est; and  that,  in  case  Gilbert  should  not  redeem  it  before  twelve 
months,  the  defendant  should  be  authorized  to  sell  it,  and  repay 
himself  principal  and  interest.  The  plaintiff  afterward  bought  the 
chronometer  from  Gilbert,  whilst  it  was  in  the  defendant's  hands, 
after  the  expiration  of  the  year;  he  then  tendered  to  the  defendant 
the  amount  due,  and  demanded  possession  of  it,  and  on  the  de- 
fendant's refusing  to  deliver  it,  brought  the  present  action.  It  was 
contended  for  the  defendant,  that  no  property  passed  to  the  plain- 
tiff by  the  sale;  that  it  was  merely  an  assignment  of  a  right  of 
action,  with  an  equity  of  redemption;  and  the  learned  Judge,  being 
of  that  opinion,  directed  the  jury  to  find  their  verdict  in  favor  of 
the  defendant;  giving  leave  to  the  plaintiff  to  move  to  enter  a  ver- 
dict for  him  for  the  sum  of  £19  10s. 

RoLFE,  B.  This  was  an  action  of  trover  for  a  chronometer.  It 
appeared  on  the  trial  that  the  chronometer  in  question  had  been 

19 


20  CONVEYANCE 

pawned  by  the  owner  with  the  defendant,  and  at  the  time  of  the 
pawn,  the  owner  delivered  to  the  defendant  a  written  paper,  au- 
thorizing him  to  sell  if  the  chronometer  was  not  redeemed  within 
a  year.  The  owner  afterward  sold  it  to  the  plaintiff,  subject  to 
the  defendant's  right  as  pawnee.  The  plaintiff,  then,  after  the 
year  had  expired,  tendered  to  the  defendant  the  amount  due  on  the 
pawn,  but  the  defendant  denied  the  plaintiff's  right  to  redeem,  and 
i-efused  to  deliver  up  the  chronometer,  and,  thei-efore,  the  plain- 
tiff brought  this  action.  On  this  state  of  facts,  the  verdict  on  the 
issue  on  the  plea  denying  the  plaintiff's  possession,  was  by  the 
direction  of  mj^  brother  Parke,  who  tried  the  cause,  taken  for  the 
defendant,  with  liberty,  nevertheless,  for  the  plaintiff  to  move  to 
enter  a  verdict  for  him,  with  £19  10s.  damages,  in  case  the  Court 
should  be  of  opinion  that  he  had  proved  the  issue.  The  learned 
Judge  was  inclined  to  think  that  this  was  not  the  case  of  a  simple 
pawn,  but  that  the  terms  on  which  the  chronometer  was  pledged 
were  such  as  to  give  the  defendant  something  more  than  the  right 
of  a  pawnee,  and  operated  as  a  mortgage.  If  he  was  a  mortgagee, 
and  the  absolute  property  was  transferred  to  him,  defeasible  upon 
repayment  of  the  money  advanced,  the  assignee  of  the  right  of  re- 
demption, which  only  remained  in  the  original  owner,  could  have 
maintained  no  action  of  trover  after  tendering  the  money;  but, 
considering  the  terms  of  the  instrument  which  accompanied  the 
deposit,  we  all  agree  in  thinking,  that,  though  they  gave  more  than 
the  ordinary  right  of  a  pawnee,  viz.,  the  right  to  sell,  which,  being 
part  of  the  security  for  the  advance,  was  irrevocable  by  the  pledgor 
or  his  assignee,  they  did  not  constitute  a  mortgage  or  transfer  of 
the  entire  legal  property  in  the  chattel  itself.  The  case,  therefore, 
stands  on  the  same  footing,  as  far  as  relates  to  the  right  of  the 
pawnor,  with  an  ordinary  pledge. 

A  rule  nisi  having  been  granted,  pursuant  to  the  leave  reserved, 
Mr.  Petersdorff,  for  the  defendant,  showed  cause,  and  contended 
that  the  verdict  was  right,  on  the  ground  that  a  pawnor  cannot 
transfer  to  another  such  a  right  of  possession  as  enables  him  to 
bring  an  action  of  trover.  There  is  very  little  to  be  found  in  the 
books  on  the  subject  of  the  right  of  a  pawnor  over  the  chattel 
pawned;  but  this  is  very  clear,  that,  notwithstanding  the  pawn, 
the  pawnor  still  retains  a  qualified  property;  and,  in  the  absence  of 
direct  authority  on  the  point,  this  seems  to  us  decisive  in  favor  of 
his  right  to  sell,  and  by  the  sale  to  transfer  to  the  purchaser  his 
qualified  property  in  the  goods  pawned,  together  with  all  the  rights 
incident  thereto.     The  case  was  argued  for  the  defendant,  as  if 


FRANKLIN    V.    NEATE  21 

what  this  pawnor  transferred,  or  sought  to  transfer,  was  a  mere 
right  of  action.  But  this  is  not  so;  he  transfers  the  property  in 
the  chattel,  quahfied,  indeed,  by  the  right  existing  in  the  pawnee, 
but  still  a  right  of  property,  and  the  right  of  action  afterwards 
exists  in  the  purchaser,  not  in  consequence  of  its  having  been  trans- 
ferred to  him  by  the  original  pawnor,  but  by  reason  of  the  pawnee 
having  wrongfully  converted  to  his  own  use  that  which  by  the  sale 
became  the  property  of  the  purchaser. 

We  do  not  feel  at  all  pressed  by  the  argument  ab  inconvenienti , 
urged  by  Mr.  Petersdorff.  "  If  several  chattels,"  he  asked,  "shoukl 
be  pawned  for  one  sum,  could  separate  sales  be  made  of  each  to 
different  purchasers?"  We  answer,  undoubtedly  they  may;  the 
pawnee  will,  of  course,  not  be  bound  to  part  with  any  of  the  chat- 
tels until  his  whole  debt  is  paid;  but,  subject  to  the  claim  of  the 
pawnee,  the  pawnor  has  the  same  right  over  each  chattel  sepa- 
rately which  he  had  before  the  pawn  was  made.  Again,  it  is  said, 
suppose  the  chattel  is  injured  by  default  of  the  pawnee,  while  in 
his  custody,  who  was  to  sue  the  pawnee,  the  original  pawnor  or  the 
purchaser?  The  answer  is  obvious.  The  person  with  whom  the 
contract  is  made,  that  is,  the  original  depositor,  is  the  proper  plain- 
tiff, if  the  action  be  for  a  breach  of  contract  express  or  implied,  un- 
less a  new  one  be  made  with  the  purchaser;  the  owner  for  the  time 
being  is  the  proper  plaintiff,  if  the  injury  be  by  the  destruction 
or  conversion  of  the  chattel;  just  as,  in  the  case  of  a  carrier,  the 
original  employer  is  the  person  to  sue  for  the  loss  for  negligent 
carriage,  or  other  breach  of  contract — the  other  subsequent  pur- 
chaser for  the  conversion  after  the  purchase. 

That  in  ordinary  cases  of  bailment,  not  by  way  of  pawn,  the 
bailor  may  sell,  is  a  proposition  admitting  of  no  doubt;  indeed,  it 
is  assumed  to  be  law  by  Lord  Holt,  in  one  of  the  cases  relied  on  by 
]\Ir.  Petersdorff  (Rich  v.  Aldred,  6  Mod.  216),  where  he  says: 
"  If  A.  bails  goods  to  C,  and  after  gives  his  whole  right  in  them  to 
B.,  B.  cannot  maintain  detinue  for  them  against  C.  because  the 
special  propeHy  that  C.  acquires  by  the  bailment  was  not  there})y 
transferred  to  B.;"  and  there  does  not  seem  to  be  any  solid  ground 
of  distinction,  in  this  respect,  between  a  bailment  by  way  of  pawn 
and  any  other  bailment. 

With  so  little  then  of  direct  authority,  we  must  act  on  the  general 

principle,  that  ajawnor,  like  every  other  bailor,  retains  his  pro|> 

erty  in  the  goods  pawned,  subjex't  onTy~Tc7  the  quahHeJprop- 

"ertyTransferreH^to  the  pawnee:  that  as  an  incTdent^to  such  prop^.^ 

■ei-TyTlTeTras  th^lught  ^fsale,  and  that  after  the  sale  the  purchaser 


22 


CONVEYANCE 


has  the  samp  jr^^orocf  ij^  |}^o  chattel  which  t he 
rule  must,  thprpfnre,  bfinigHe  absolute.^ 


1  "It  appears  to  me  that  consider- 
able confusion  has  been  introduced 
into  this  subject  by  the  somewhat 
indiscriminate  use  of  the  words 
'special  property,'  as  alike  applicable 
to  the  right  of  personal  retention  in 
case  of  a  lien  and  the  actual  interest 
in  the  goods  created  by  contract  of 
pledge  to  secure  the  payment  of 
money.  In  Legg  v.  Evans,  6  M.  &  W. 
42,  the  nature  of  a  lien  is  defined  to 
be  a  'pyersonal  right  which  cannot 
be  parted  with;'  but  'the  contract  of 
pledge  carries  an  implication  that  the 
security  shall  be  made  effectual  to 
discharge  the  obhgation.'  Story  on 
Bailments,  §  311.  In  each  case  the 
general  property  remains  in  the 
pawnor;  but  the  question  is  as  to  the 
nature  and  extent  of  the  interest, 
or  special  property,  passing  to  the 
bailee,  in  the  two  cases.  Mr.  Justice 
Story,  in  his  treatise  on  Bailments, 
§  324,  thus  describes  the  right  and 
interest  of  the  pawnee:  'He  may  by 
the  common  law  deliver  over  the 
pawn  into  the  hands  of  a  stranger 
for  safe  custody,  without  considera- 
tion, or  he  may  sell  or  assign  all  his 
interest  in  the  pawn,  or  he  may  con- 
vey the  same  interest,  conditionally, 
by  way  of  pawn  to  another  person, 
without  in  either  case  destroying  or 
invahdating  his  security;  but  if  the 
pawnee  should  undertake  to  pledge 
the  property  (not  being  negotiable 
securities)  for  a  debt  beyond  his 
own,  or  to  make  a  transfer  thereof  to 
his  own  creditor  as  if  he  were  the 
absolute  owner,  it  is  clear  that  in 
such  a  case  he  would  be  guilty  of  a 
breach  of  trust,  and  his  creditor  would 
acquire  no  title  beyond  that  held 
by  the  pawnee.  The  only  question 
is,  whether  the  creditor  should  be 
entitled  to  retain  the  pledge  until 
the  original  debt  was  discharged,  or 


whether  the  owner  might  recover 
the  pledge  in  the  same  manner  as 
in  the  case  of  a  naked  tort,  without 
any  quahfied  right  in  the  first 
pawnee.'  .  .  . 

"There  would  therefore  appear  to 
be  some  real  difference  in  the  inci- 
dents between  a  simple  hen,  like  that 
in  Legg  v.  Evans,  6  M.  &  W.  36,  and 
the  lien  of  a  broker  or  factor  before 
the  Factor's  Act,  and  the  case  of  a 
deposit  by  way  of  pledge  to  secure 
the  repayment  of  money,  which 
latter  more  nearly  resembles  an  or- 
dinary mortgage,  except  that  the 
pawnor  retains  the  general  property 
in  the  goods  pledged  which  the 
mortgagor  does  not  in  the  case  of  an 
ordinary  mortgage.  Notes  to  Coggs  v. 
Bernard,  1  Smith's  L.  C.  194  (5th  ed.). 
A  lien,  as  we  have  seen,  gives  only  a 
personal  right  to  retain  possession. 
A  factor's  or  broker's  lien  was  ap- 
parently attended  with  the  addi- 
tional incident  that  to  the  extent  of 
his  lien  he  might  transfer  even  the 
possession  of  the  subject-matter  of 
the  hen  to  a  third  person,  'appoint- 
ing him  as  his  servant  to  keep  pos- 
session for  him.'  In  a  contract  of 
pledge  for  securing  the  payment  of 
money,  we  have  seen  that  the  pawnee 
may  seU  and  transfer  the  thing 
pledged  on  condition  broken;  but 
what  implied  condition  is  there  that 
the  pledgee  shall  not  in  the  mean- 
time part  with  the  possession  thereof 
to  the  extent  of  hi3  interest?  It 
may  be  that  upon  a  deposit  by  way 
of  pledge  the  express  contract  be- 
tween the  parties  may  operate  so 
as  to  make  a  parting  with  the  posses- 
sion, even  to  the  extent  of  his  in- 
terest, before  condition  broken,  so 
essential  a  violation  of  it  as  to  revest 
the  right  of  possession  in  the  pawnor;, 
but  in  the  absence  of  such  terms,, 


BROWN   V.    BEMENT  23 

BROWN  V.   BEMENT 

Supreme  Court  of  New  York,  1811 

(8  Johns.  75) 

This  was  an  action  of  trover,  for  three  horses  and  a  chair.  The 
cause  was  tried  at  the  Columbia  Circuit,  in  September,  1810,  be- 
fore Mr.  Justice  Thompson. 

The  plaintiff  proved  that  he  was  possessed  of  the  horses  and 
chair,  and  that,  afterward,  on  the  26th  of  April,  1810,  he  tendered 
the  sum  of  283  dollars  and  5  cents  to  Bement,  one  of  the  defend- 
ants, and  demanded  the  horses  and  chair,  who  refused  to  deliver 
them,  and  referred  the  plaintiff  to  Strong,  the  other  defendant. 
The  plaintiff  on  the  next  day,  made  a  tender  of  the  same  sum  to 
Strong,  and  demanded  the  property,  but  Strong  refused,  saying 
the  horses  and  chair  were  in  possession  of  Bement.  The  defend- 
ants then  produced  in  evidence  an  absolute  bill  of  sale  of  the  horses 
and  chair  to  the  defendants,  under  the  hand  and  seal  of  the  plain- 
tiff, dated  27th  October,  1809,  for  the  consideration  of  210  dollars 
and  35  cents.  And  the  plaintiff  gave  in  evidence  a  writing  bearing 
the  same  date,  executed  by  the  defendants,  by  which  they  stipu- 
lated, on  the  payment  of  210  dollars  and  35  cents  to  them,  by  the 
plaintiff,  in  14  days  from  the  date,  to  deliver  to  the  plaintiff  the 
horses  and  the  chair;  but  if  the  property  was  lost  in  the  meantime, 
they  were  not  to  be  responsible;  nor  for  any  expenses  attending  the 
property  during  the  time. 

It  was  proved,  that  before  the  commencement  of  the  suit,  Be- 
ment had  told  the  plaintiff  he  was  willing  to  return  the  property 
which  remained,  but  that  one  of  the  horses  had  been  sold.    The 

why  are  they  to  be  implied?    There  in  the  goods  deposited;  but  what  is 

may  possibly  be  cases  in  which  the  the  authority  for  saying  that  until 

very  nature  of  the  thing  deposited  condition    broken    the    pawnee    has 

might  induce  a  jury  to  believe  and  only  a  personal  right  to  retain  the 

find   that  it  was  deposited  on   the  goods  in  his  own  possession?" — Per 

understanding    that   the    possession  Mellor,  J.,  in  Donald  v.  Suckling, 

should  not  be  parted  with;  but  in  1  Q.  B.  585  (1866). 

the  case  before  us  we  have  only  to  See  article,  ''The  True  Nature  of  a 

deal  with   the  agreement   which   is  Pa^iiee's  Interest  in  Goods  Pawned," 

stated  in  the  plea.     The  object  of  by   T.    Cj-prian   Williams,    31    Law 

the  deposit  is  to  secure  the  repayment  Quart.  Rev.  75-83  (Jan.,  1915).     See 

of  a  loan,  and  the  effect  is  to  create  also,  Attenborongh  v.  Solomon,  [1913] 

an  interest  and  a  right  of  property  in  A.  C.  76. 
the  pawnee,  to  the  extent  of  the  loan, 


24  CONVEYANCE 

plaintiff  answered,  that  if  they  could  agree  as  to  the  price  of  the 
horse  sold,  that  would  create  no  difficulty.  A  verdict  was  found 
for  the  plaintiflf.  by  consent,  subject  to  the  opinion  of  the  Court; 
and  it  was  agreed  that  if  the  plaintiff  was  entitled  to  recover  the 
whole  property,  the  verdict  should  be  entered  for  438  dollars ;  but 
if  for  the  one  horse  only  which  had  been  sold,  then  the  verdict 
was  to  be  for  85  dollars;  and  if  the  Court  should  be  of  opinion  that 
the  plaintiff  was  not  entitled  to  recover  at  all,  then  a  judgment  of 
nonsuit  was  to  be  entered. 

Three  points  were  raised  for  the  consideration  of  the  Court : 

1.  That  the  writing  given  by  the  defendants  to  the  plaintiff 
made  the  property  a  pledge,  redeemable  at  any  time. 

2.  That  on  tender  of  the  money,  the  plaintiff's  right  of  action 
was  complete. 

3.  That  the  plaintiff  was  entitled,  at  least,  to  recover  the  value 
of  the  horse  sold. 

Per  Curiam.  The  plaintiff  has  not  shown  a  right  of  action. 
Here  was  a  complete  transfer  of  the  title  to  the  goods  in  question, 
with  a  condition  of  defeasance,  on  the  payment  of  210  dollars  and 
35  cents,  in  14  days.  This  was  a  mortgage,  not  a  technical  pledge; 
and  all  that  was  said  in  the  case  of  Cortehjou  v.  Lansing  (2  Caines's 
Cases  in  Error,  200)  respecting  the  nature  and  redeemableness  of 
pledges,  has  no  application  to  the  case.  The  distinction  between  a 
pledge  and  a  mortgage  of  goods  was  recognized  by  this  court  in 
Barrow  v.  Paxton  (5  Johns.  Rep.  258).  A  mortgage  of  goods  is  a^ 
ploHfTp  and  mnreiJor  it  is  an  absolute  pledge  to  become  an  absolute 
interest,_[f  not  redppT-ned  at  the  specified  time.  After  the  condition 
^forfeitedTthe  mortgagee  has  an  absoluteinteresfln  tKe  thing  mort- 
..^gaged';  Whereas  the  pawnee  has  but  a  special  property  m  tfie  goods, 
'to  detain  them  for  his  security  (2  Ves.  Jun.  378;  1  Powell  on  Mort. 
3)"!  The  title  of  tKe  delenclants  here  became  absolute  after  the 
14  days;  and  though  it  does  not  appear  whether  one  of  the  horses 
was  sold  after  or  })efore  the  expiration  of  the  time  to  redeem,  that 
omission  is  not  material,  as  no  attempt  was  made,  in  season,  to 
redeem. 

Judgment  of  nonsuit  must,  therefore,  be  entered  according  to  the 
stipulation  in  the  case. 


CoNARD  V.  Atlantic  Insurance  Co.,  1  Peters,  386  (1828). 
Action  of  trespass  de  bonis  asporfatis  brought  in  the  Circuit  Court 
of  the   I'nited  States  for  the  Distiict  of  Pennsylvania,  by  the 


CONARD    V.    ATLANTIC    IXSIPAN'CE    CO.  25 

Atlantic  Insurance  Company  to  recover  against  the  defendant. 
John  Conard,  the  Marshal  of  that  district,  the  value  of  certain 
teas  shipped  on  board  the  ships  Addison  and  Superior,  and  levied 
upon  by  him,  upon  an  execution  in  favor  of  the  United  States 
against  one  Edward  Thompson,  as  the  property  of  the  latter.  .  .  . 
The  cargoes  had  previously  been  ti-ansferred  by  Thompson  to  the 
Insurance  Co.  by  assignment  of  the  bills  of  lading  to  secure  the 
payment  of  a  res'pondentia  bond.  It  was  held  that  this  constituted 
a  mortgage.  The  defendant  contended  that  the  statutoiy  priority 
of  the  United  States  (Stat.  1799,  c.  128,  §  65)  extended  to  this  case. 
The  Supreme  Court  overruled  the  claim  in  an  opinion  by  Mr. 
Justice  Story,  from  which  the  following  is  taken  (440) : 

"Then,  again,  it  is  contended  on  behalf  of  the  United  States, 
that  the  priority  thus  created  by  law,  if  it  be  not  of  itself  a  lien,  is 
yet  superior  to  any  lien,  and  even  to  an  actual  mortgage,  on  the 
personal  property  of  the  debtor." 

It  is  admitted  that  where  any  absolute  conveyance  is  made,  the 
property  passes  so  as.  to  defeat  the  priority;  but  it  is  said  that  a 
lien  has  been  decided  to  have  no  such  effect,  and  that  in  the  eye 
of  a  Court  of  Equity  a  mortgage  is  but  a  lien  for  a  debt.  Thelhtson 
V.  Smith,  2  Wheat.  396,  has  been  mainly  relied  on  in  support  of 
this  doctrine.  That  case  has  been  greatly  misunderstood  at  the 
bar,  and  will  require  a  particular  explanation.  But  the  language 
of  the  learned  Judge  who  delivered  the  opinion  of  the  Court  in  that 
case  is  conclusive  on  the  point  of  a  mortgage.  "The  United 
States,"  said  he,  "are  to  be  first  satisfied;  but  then  it  must  be  out 
of  the  debtor's  estate.  If,  therefore,  before  the  right  of  preference 
has  accrued  to  the  United  States,  the  debtor  has  made  a  boJia  fide 
conveyance  of  his  estate  to  a  third  person,  or  has  mortgaged  the 
same  to  secure  a  debt;  or  if  his  property  has  been  seized  under  a 
fieri  facias,  the  property  is  divested  out  of  the  debtor  and  cannot 
be  made  liable  to  the  United  States."  The  same  doctrine  may  be 
deduced  from  the  case  of  the  United  States  v.  Fisher,  2  Cranch, 
358,  where  the  Court  declared  that  "no  bona  fide  tran.sfer  of  prop- 
erty in  the  ordinary  course  of  business  is  overreached  by  the 
statutes."  and  "that  a  mortgage  is  a  conveyance  of  property,  and 
passes  it  conditionally  to  the  mortgagee."  If  so  plain  a  proposi- 
tion required  any  authority  to  support  it,  it  is  clearly  maintained 
in  United  States  v.  Hooe,  3  Cranch.  73. 

It  is  true,  that  in  discussions  in  Courts  of  Equity,  a  mortgage  is 
sometimes  called  a  lien  for  debt.  And  so  it  certainly  is,  and  some- 
thing more;  it  is  a  transfer  of  the  property  itself,  as  security  fci" 


26  CONVEYANCE 

the  debt.  This  must  be  admitted  to  be  true  at  law,  and  it  is  equally 
true  in  equity,  for  in  this  respect  equity  follows  the  law.  It  does 
not  consider  the  estate  of  the  mortgagee  as  defeated  and  reduced 
to  a  mere  lien,  but  it  treats  it  as  a  trust  estate,  and  according  to 
the  intention  of  the  parties,  as  a  qualified  estate  and  security. 
When  the  debt  is  discharged,  there  is  a  resulting  trust  for  the  mort- 
gagor. It  is,  therefore,  only  in  a  loose  and  general  sense  that  it  is 
sometimes  called  a  lien,  and  then  only  by  way  of  contrast  to  an 
estate  absolute  and  indefeasible.^ 


Ex  parte  Foster,  2  Story,  131,  142  (1842).  ''But  it  is  said  that 
an  attachment  under  our  law  constitutes  a  lien  upon  the  prop- 
erty attached;  that  it  is  a  perfect,  fixed  and  vested  hen,  as  much  so 
as  a  lien  by  a  mortgage  upon  personal  estate;  that  it  gives  a  vested 
interest  in  the  real  estate  attached,  so  that  the  creditor  may  dispute 
the  validity  of  a  will  thereof,  and  that  it  is  deemed  equivalent  to  a 
title  by  purchase  for  a  valuable  consideration.  And  certain  author- 
ities are  relied  on  to  establish  and  confirm  these  positions.  .  .  . 

''It  is  true,  as  asserted  at  the  bar,  that  an  attachment  upon 
mesne  process  is  constantly  spoken  of  in  our  Reports  as  a  lien,  and 
doubtless  it  is  so  in  a  very  general  sense  of  the  term,  adopted  by 
way  of  analogy  and  illustration,  rather  than  from  a  very  exact 
resemblance  which  it  bears  to  liens,  generally  recognized  as  such  at 
the  common  law,  or  in  equity,  or  in  maritime  jurisprudence.  But, 
as  has  been  truly  said  by  Lord  Coke,  no  simile  holds  in  everything. 
Nullum  simile  qaatuor  pedibus  currit.  Lord  Tenterden  has  said 
that  the  word  lien,  in  its  proper  sense,  in  the  law  of  England,  im- 
ports that  the  party  is  in  possession  of  the  thing  that  he  claims  to 
detain,  and  that  where  there  is  no  possession,  actual  or  construc- 
tive, there  can  be  no  lien.  And  this  is  generally  true,  perhaps  univer- 
sally true  at  the  common  law,  independently  of  statutory  provi- 
sions, or  of  special  contract.  The  doctrine  was  expHcitly  asserted 
by  Mr.  Justice  Buller  in  delivering  his  opinion  in  the  great  case  of 
Lickbarrow  v.  Mason,  before  the  House  of  Lords  (6  East.  R.  21, 
note;  id.  25),  where  he  says:  'Liens  exist  at  law  only  in  cases  where 
the  party  entitled  to  them  has  the  possession  of  the  goods,  and  if 
he  once  part  with  the  possession  after  the  lien  attaches,  the  lien  is 
gone.'  .  .  . 

"In  equity,  also,  liens  exist  independent  of  possession,  either 

^  Later  cases  seem  to  declare  that  Thomas  Scattergood,  Fed.  Cas.  No. 
a  lien  also  will  not  be  overriden.    The      11,106(1828). 


Ex  parte  foster  27 

actual  or  constructive;  as,  for  example,  the  lien  of  a  vendor  on  the 
land  for  the  unpaid  purchase  money.  But  it  has  been  the  long  es- 
tablished doctrine,  in  equity,  that  a  lien  is  not,  in  strictness,  either 
a.  jus  in  re,  or  a  jus  ad  rem;  that  is,  it  is  not  a  property  in  the  thing 
itself,  nor  does  it  constitute  a  right  of  action  for  the  thing.  It 
more  properly  constitutes  a  charge  upon  the  thing.  It  is,  therefore, 
at  most,  a  simple  right  to  possess  and  retain  property  until  some 
charge  attaching  to  it  is  paid  or  discharged;  or  a  mere  right  to 
maintain  a  suit  in  rem  to  enforce  payment  of  the  charge.  Mr. 
Justice  BuUer,  speaking  of  liens  at  the  common  law,  is  equally  ex- 
pressive. He  says:  'Liens  are  not  founded  on  property,  but  they 
necessarily  suppose  the  property  to  be  in  some  other  person,  and 
not  in  him  who  sets  up  the  right.    They  are  qualified  rights.' 

"Now,  an  attachment  does  not  come  up  to  the  exact  definition 
or  meaning  of  a  lien,  either  in  the  general  seuvse  of  the  common  law, 
or  in  that  of  the  maritime  law,  or  in  that  of  equity  jurisprudence. 
Not  in  that  of  the  common  law,  because  the  creditor  is  not  in  pos- 
session of  the  property;  but  it  is  in  custodia  legis,  if  personal  prop- 
erty; if  real  property,  it  is  not  a  fixed  and  vested  charge,  but  it  is 
a  contingent,  conditional  charge,  until  the  judgment  and  levy. 
Not  in  the  sense  of  the  maritime  law,  which  does  not  recognize  or 
enforce  any  claim  as  a  lien,  until  it  has  become  absolute,  fixed  and 
vested.  Not  in  that  of  equity  jurisprudence,  for  there  a  lien  is  not 
a  jus  in  re  or  a  jus  ad  rem.  It  is  but  a  charge  upon  the  thing,  and 
then  only  when  it  has,  in  Hke  manner,  become  absolute,  fixed  and 
vested.  .  .  ." — Per  Story,  J. 


CHAPTER   I     (Continued) 

Section  II.    After-acquired  Property 

Perkins,  Laws  of  England  (about  1550).  Grants.  §  65.  Now 
is  to  shew  of  things  to  be  granted  or  charged :  And  as  to  that  know, 
that  it  is  a  common  learning  in  the  law,  that  a  man  cannot  grant  or 
charge  that  which  he  hath  not :  And  therefore,  if  a  man  grant  a 
rent  charge  out  of  the  Manour  of  Dale,  and  in  truth  he  hath  not 
anything  in  the  Manour  of  Dale,  and  after  he  purchase  the  Manour 
of  Dale,  yet  he  shall  hold  it  discharged. 

HOLROYD  V.   MARSHALL 

House  of  Lords,  1861 

(10  H.L.  C.  191) 

James  Taylor  carried  on  the  business  of  a  damask  manufacturer 
at  Hayes  Mill,  Ovenden,  near  Halifax,  in  the  county  of  York. 
In  1858  he  became  embarrassed,  a  sale  of  his  effects  by  auction 
took  place,  and  the  Holroyds,  who  had  previously  employed  him 
in  the  way  of  his  business,  purchased  all  the  machinery  at  the  mill. 
The  machinery  was  not  removed,  and  it  was  agreed  that  Taylor 
should  buy  it  back  for  5000L  An  indenture,  dated  the  20th  Sep- 
tember, 1858,  was  executed,  to  which  A.  P.  and  W.  Holro3'd  were 
parties  of  the  first  part,  James  Taylor  of  the  second  part,  and 
Isaac  Brunt  of  the  third  part.  This  indenture  declared  the  ''ma- 
chinery, implements,  and  things  specified  in  the  schedule  hereunder 
written  and  fixed  in  the  said  mill,"  to  belong  to  the  Holroyds:  that 
Taylor  had  agreed  to  purchase  the  sanie  for  5000Z.,  but  could  not 
then  pay  the  purchase  money,  wherefore  it  was  agreed,  &c.,  that 
"all  the  machinery,  implements,  and  things  specified  in  the  sched- 
ule (hereinafter  designated  'the  said  premises')"  were  assigned 
to  Brunt,  in  trust  for  Taylor,  until  a  certain  demand  for  payment 
should  be  made  upon  him,  and  then,  in  case  he  should  paj'  to  the 
Holroyds  a  sum  of  5000/.,  with  interest,  for  him  absolutely.  If 
default  in  payment  was  made,  Brunt  was  to  have  power  to  sell,  and 
28 


HOLROYD    V.    MARSHALL  29 

hold  the  moneys,  in  pursuance  of  the  trust  for  sale,  upon  trust, 
to  pay  off  the  Holroyds,  and  to  pay  the  surplus,  if  any,  to  Taylor. 
The  indenture,  in  addition  to  a  clause  binding  Taylor,  during  the 
continuance  of  the  trust,  to  insure  to  the  extent  of  5000/.  contained 
the  following  covenant:  "That  all  machinery,  implements,  and 
things  which,  during  the  continuance  of  this  security,  shall  he 
fixed  or  placed  in  or  about  the  said  mill,  buildings,  and  appur- 
tenances, in  addition  to  or  substitution  for  the  said  premises,  or 
any  part  thereof,  shall,  during  such  continuance  as  aforesaid,  be 
subject  to  the  trusts,  powers,  provisoes,  and  declarations  hereinbe- 
fore declared  and  expressed  concerning  the  said  premises;  and  that 
the  said  James  Taylor,  his  executors,  &c.,  will  at  all  times,  during 
such  continuance  as  aforesaid,  at  the  request,  &c.,  of  the  said  Hol- 
royds, their  executors,  &c.  do  all  necessary  acts  for  assuring  .such 
added  or  substituted  machinery,  implements,  and  things,  so  that 
the  same  may  become  vested  accordingly."  The  deed  was,  four 
days  afterwards,  duly  registered,  as  a  bill  of  sale,  under  the  17  & 
18  Vict.  c.  36.  Taylor,  who  remained  in  possession,  sold  and  ex- 
changed some  of  the  old  machiner}^,  and  introduced  some  new 
machinery,  of  which  he  rendered  an  account  to  the  Holroyds  be- 
fore April,  1860;  but  no  conveyance  was  made  of  this  new  machin- 
ery to  them,  nor  was  any  act  done  by  them,  or  on  their  behalf, 
to  constitute  a  formal  taking  of  possession  of  the  added  machinery. 
On  the  2d  April,  1860,  the  Holroyds  served  Taylor  with  a  demand 
for  payment  of  the  5000/.  and  interest,  and  no  payment  being  made, 
they,  on  the  30th  April,  took  possession  of  the  machinery,  and 
advertised  it  for  sale  by  auction  on  the  21st  May  following. 

On  the  13th  April,  1860,  Emil  Preller  sued  out  a  writ  of  scire 
facias  against  Taylor  for  the  sum  of  155/.  18s.  4d.,  damages  and 
costs,  which  was  executed  on  the  following  day  by  James  Davis, 
an  officer  of  Mr.  Garth  Marshall,  then  high  sheriff  of  York.  On 
the  10th  May,  1860,  a  similar  writ,  for  138/.  3s.  3(/.,  was  executed 
by  Davis,  and  on  the  25th  May,  1860,  the  property  was  sold  by  the 
sheriff.  Notice  was  given  to  the  sheriff  of  the  bill  of  sale  executed 
in  favour  of  the  Holroyds.  The  only  part  of  the  machinery  claimed 
by  the  execution  creditors  consisted  of  those  things  which  had  been 
purchased  by  Taylor  since  the  date  of  the  bill  of  sale.  The  sheriff 
insisted  on  taking  under  the  writs  these  added  articles,  and  the 
Holroyds,  on  the  30th  May,  1860,  filed  |heir  bill  against  the  sheriff, 
and  the  other  necessary  parties,  praying  for  an  assessment  of  dam- 
ages and  general  relief.  The  cause  was  heard  before  Vice-Chan- 
cellor  Stuart,  who,  on  27th  July,  1860,  made  an  order,  declaring 


^ 


30  CONVEYANCE 

that  the  whole  machinery  in  the  mill,  including  the  added  and  sub- 
stituted articles,  at  the  time  of  the  execution,  vested  in  the  plain- 
tiffs by  virtue  of  the  bill  of  sale.  On  appeal,  before  Lord  Chan- 
cellor Campbell,  on  the  22d  December,  1860,  the  Vice-Chancellor's 
order  was  reversed.    This  present  appeal  was  then  brought. 

The  Lord  Chancellor  (Lord  Westbury),  after  stating  the 
facts  of  the  case,  said :  My  Lords,  the  question  is,  whether  as  to  the 
machinery  added  and  substituted  since  the  date  of  the  mortgage 
the  title  of  the  mortgagees,  or  that  of  the  judgment  creditor,  ought 
to  prevail.  It  is  admitted  that  the  judgment  creditor  has  no  title 
as  to  the  machinery  originally  comprised  in  the  bill  of  sale;  but  it  is 
contended  that  the  mortgagees  had  no  specific  estate  or  interest  in 
the  future  machinery.  It  is  also  admitted  that  if  the  mortgagees 
had  an  equitable  estate  in  the  added  machinery'',  the  same  could 
not  be  taken  in  execution  by  the  judgment  creditor. 

The  question  may  be  easily  decided  by  the  application  of  a  few 
elementary  principles  long  settled  in  Courts  of  equity.  In  equity 
it  is  not  necessary  for  the  alienation  of  property  that  there  should 
be  a  formal  deed  of  conveyance.  A  contract  for  valuable  consid- 
eration, by  which  it  is  agreed  to  make  a  present  transfer  of  prop- 
erty, passes  at  once  the  beneficial  interest,  provided  the  contract  is 
one  of  which  a  Court  of  equity  will  decree  specific  performance. 
In  the  language  of  Lord  Hardwicke,  the  vendor  becomes  a  trustee 
for  the  vendee;  subject,  of  course,  to  the  contract  being  one  to  be 
specifically  performed.  And  this  is  true,  not  only  of  contracts 
relating  to  real  estate,  but  also  of  contracts  relating  to  personal 
property,  provided  that  the  latter  are  such  as  a  Court  of  equity 
would  direct  to  be  specifically  performed. 

A  contract  for  the  sale  of  goods,  as,  for  example,  of  five  hundred 
chests  of  tea,  is  not  a  contract  which  would  be  specifically  per- 
formed, because  it  does  not  relate  to  any  chests  of  tea  in  particu- 
lar; but  a  contract  to  sell  five  hundred  chests  of  the  particular 
kind  of  tea  which  is  now  in  my  warehouse  in  Gloucester,  is  a  con- 
tract relating  to  specific  property,  and  which  would  be  specifically 
performed.  The  buyer  may  maintain  a  suit  in  equity  for  the  de- 
livery of  a  specific  chattel  when  it  is  the  subject  of  a  contract, 
and  for  an  injunction  (if  necessary)  to  restrain  the  seller  from  de- 
livering it  to  any  other  person. 

The  effect  in  equity  of  a  mere  contract  as  amounting  to  an  aliena- 
tion, may  be  illustrated  by  the  law  relating  to  the  revocation  of 
wills.    If  the  owner  of  an  estate  devises  it  by  will,  and  afterwards 


HOLROYD    V.    MARSHALL 


31 


contracts  to  sell  it  to  a  purchaser,  but  dies  before  the  contract  is 
pei-formed,  the  will  is  revoked  as  to  the  beneficial  or  equitable  in- 
terest in  the  estate,  for  the  contract  converted  the  testator  into  a 
trustee  for  the  purchaser;  and,  in  hke  manner,  if  the  purchaser 
dies  intestate  before  performance  of  the  contract,  the  equitable 
estate  descends  to  his  heir  at  law,  who  may  require  the  personal 
representative  to  pay  the  purchase  money.  But  all  this  depends  on 
the  contract  being  such  as  a  Court  of  equity  would  decree  to  be 
specifically  performed. 

There  can  be  no  doubt,  therefore,  that  if  the  mortgage  deed  in 
the  present  case  had  contained  nothing  but  the  contract  which  is 
involved  in  the  aforesaid  covenant  of  Taylor,  the  mortgagor,  such 
contract  would  have  amounted  to  a  valid  assignment  in  equity  of 
the  whole  of  the  machinery  and  chattels  in  question,  supposing 
such  machinery  and  effects  to  have  been  in  existence  and  upon  the 
mill  at  the  time  of  the  execution  of  the  deed. 

But  it  is  alleged  that  this  is  not  the  effect  of  the  contract,  be- 
cause it  relates  to  machinery  not  existing  at  the  time,  but  to  be 
acquired  and  fixed  and  placed  in  the  mill  at  a  future  time.  It  is 
quite  true  that  a  deed  which  professes  to  convey  property  which  is 
not  in  existence  at  the  time  is  as  a  conveyance  void  at  law,  simply 
because  there  is  nothing  to  convey.  So  in  equity  a  contract  which 
engages  to  transfer  property,  which  is  not  in  existence,  cannotj 
operate  as  an  immediate  aUenation  merely  because  there  is  nothing  I 
to  transfer. 

But  if  a  vendor  or  mortgagor  agrees  to  sell  or  mortgage  proft— 
erty,  real  or  personal,  ot  which  Iieis  not  possessed_at  the  time, 
"and" he  receives  the  consideration  for  the  contract,  and  afterwards 
"becomes  possessed  of  property  answering  the  description  m  the 
contract,  there  is  no  doubt  that  a  Court  of  equity  would  compel 


Tim  to  pertorm  the_contract,  and  that  the  contract  would,  in  equity, 
tranter  thebeneficial  interest  to  the  mortgagee  or  purchaser  irn- 
mediately^n  the  property  being  acquired.  This,  jfTourse,  as- 
sumes thatthe  supposed  contract  is  one  of  that  class  of  whicli_^ 
_ Court  of  equity  w'ould  decree  the  specific  performance.  It' it  be 
^  so,  then  immediately  on  the  acquisition  of  the  propertv  described 
fhp  vpndnr  o]-  rpoflgagor  would  holdit  in  trust  for  the  purchaser 
or  Tnnrfp;ngpp,  appnrr|jncr  fo  the  terms  ot'  the_cont'fact^  For  if  a 
contract  be  in  other  respects  good  and 


it  to  be  performed,  and  the 
consideration  has  been  received,  incapacity  to  perform  it  at  the 
time  of  its  execution  will  be  no  answer  when  the  means  of  doing 
so  are  afterwards  obtained. 


32  CONVEYANCE 

^  Apply  these  familiar  principles  to  the  present  case;  it  follows 
that  ininiecliately  on  the  new  machinery  and  effects  being  fixed  or 
placed  in  the  mill,  they  becani,|  subject  to  the  operation  of  the 
contract,  and  passed  in  equity  to  the  mortgagees,  to  whom  Taylor 
was  bound  to  make  a  legal  conveyance,  and  for  whom  he,  in  the 
meantime,  was  a  trustee  of  the  property  in  question. 

There  is  another  criterion  to  prove  that  the  mortgagee  acquired 
an  estate  or  interest  in  the  added  machinery  as  soon  as  it  was 
brought  into  the  mill.  If  afterwards  the  mortgagor  had  attempted 
to  remove  any  part  of  such  machinerj^  except  for  the  purpose  of 
substitution,  the  mortgagee  would  have  been  entitled  to  an  injunc- 
tion to  restrain  such  removal,  and  that  because  of  his  estate  in  the 
specific  property.  The  result  is,  that  the  title  of  the  appellants  is 
to  be  preferred  to  that  of  the  judgment  creditor.  ... 

I  therefore  advise  your  Lordships  to  reverse  the  order  of  Lord 
Chancellor  Campbell,  and  direct  the  petition  of  rehearing  pre- 
sented to  him  to  be  dismissed,  with  costs. 

Lord  Chelmsford.  The  question  in  the  case  is,  whether  the 
appellants,  who  have  an  equitable  title  as  mortgagees  of  certain 
machinery  fixed  and  placed  in  a  mill,  of  which  the  mortgagor, 
James  Taylor,  was  tenant,  are  entitled  to  the  property  which  was 
seized  by  the  sheriff,  under  two  writs  of  execution  issued  against 
the  mortgagor,  in  priority  to  those  executions,  or  either  of 
them? 

The  title  of  the  appellants  depends  upon  a  deed  dated  the  20th 
September,  1858.  [His  Lordship  here  stated  the  bill  of  sale  and 
the  other  facts  of  the  case — see  ante.]  The  machinery  sold  by  the 
sheriff  was  more  than  sufficient  to  satisfy  the  first  execution,  and 
the  appellants  claiming  a  preference  over  both  executions,  contend 
that  the  possession  taken  by  them  on  the  30th  April  entitled  them, 
at  all  events,  to  priority  over  the  second  execution  of  the  11th 
May.  The  great  question,  however,  is,  whether  they  are  entitled 
to  a  preference  over  the  first  execution  by  the  mere  effect  of  their 
deed?  or  whether  it  was  necessary  that  some  act  should  have  been 
done  after  the  new  machinery  was  fixed  or  placed  in  the  mill,  in 
order  to  complete  the  title  of  the  appellants? 

It  was  admitted  that  the  right  of  the  judgment  creditor,  who 
has  no  specific  Hen,  but  only  a  general  security  over  his  debtor's 
property,  must  be  subject  to  all  the  equities  which  attach  upon 
whatever  property  is  taken  under  his  execution.  But  it  was  said 
(and  truly  said)  that  those  equities  must  be  complete,  and  not  in- 


HOLROYD   V.    MARSHALL  33 

choate  or  imperfect,  or,  in  other  words,  that  they  must  be  actual 
equitable  estates,  and  not  mere  executory  rights. 

What,  then,  was  the  nature  of  the  title  which  the  mortgagees 
obtained  under  their  mortgage  deed?  If  the  question  had  to  be 
decided  at  law,  there  would  be  no  difficulty.  At  law  an  assign- 
ment of  a  thing  which  has  no  existence,  actual  or  potential,  at  the 
time  of  the  execution  of  the  deed,  is  altogether  void  {Robinson  v. 
Macdonnell,  5  Maulc  &  S.  228).  But  where  future  property  is 
assigned,  and  after  it  comes  into  existence,  possession  is  either  de- 
livered by  the  assignor,  or  is  allowed  Ijy  him  to  be  taken  by  the 
assignee,  in  either  case  there  would  be'the  novus  actus  interveniens 
of  the  maxim  of  Lord  Bacon,  upon  which  Lord  Campbell  rested  his 
decree,^  and  the  property  would  pass. 

It  seemed  to  be  supposed  upon  the  first  argument  that  an  assign- 
ment of  this  kind  would  not  be  void  in  law  if  the  deed  contained 
a  license  or  power  to  seize  the  after-acquired  property.  But  this 
circumstance  would  make  no  difference  in  the  case.  The  mere  as- 
signment is  itself  a  sufficient  declaratio  proecedens  in  the  words 
of  the  maxim;  and  although  Chief  Justice  Tindal,  in  the  case  of 
Lunn  V.  Thornton,  said,  "It  is  not  a  question  whether  a  deed 
might  not  have  been  so  framed  as  to  give  the  defendant  a  power  of 
seizing  the  future  personal  goods,"  he  must  have  meant,  that 
under  such  a  power  the  assignee  might  have  taken  possession,  and 
so  have  done  the  act  which  was  necessary  to  perfect  his  title  at 
law.  This  will  clearly  appear  from  the  case  of  Congreve  v.  Eveits, 
10  Exch.  298,  in  which  there  was  an  assignment  of  growing  crops 
and  effects  as  a  security  for  money  lent,  with  a  power  for  the 
assignee  to  seize  and  take  possession  of  the  crops  and  effects  bar- 
gained and  sold,  and  of  all  such  crops  and  effects  as  might  be  sub- 
stituted for  them;  and  Baron  Parke  said,  "If  the  authority  given 
by  the  debtor  by  the  bill  of  sale  had  not  been  executed,  it  would 
have  been  of  no  avail  against  the  execution.  It  gave  no  legal  title, 
nor  even  equitable  title,  to  any  specific  goods;  but  when  executed 
not  fully  or  entirely,  but  only  to  the  extent  of  taking  possession  of 
the  growing  crops,  it  is  the  same  in  our  judgment  as  if  the  debtor 
himself  had  put  the  plaintiff  in  actual  possession  of  those  crops" 
And  in  Hope  v.  HayJey,  5  Ellis  &  B.  830,  845  (a  case  much  relied 
upon  by  the  Vice-Chancellor),  where  there  was  an  agreement  to 
transfer  goods,  to  be  afterwards  acquired  and  substituted,  with  a 
power  to  take  possession  of  all  original  and  substituted  goods, 

1  Licet  dispositio  de  interesse  futuro  praecedens  quae  sortiatur  effectum,  in- 
sit  inutilis,  tamen  fieri  potest  declaratio      terveniente  novo  acta. 


34  CONVEYANCE 

Lord  Campbell,  Chief  Justice,  said,  "The  intention  of  the  contract- 
ing parties  was,  that  the  present  and  future  property  should  pass 
by  the  deed.  That  could  not  be  carried  into  effect  by  a  mere  trans- 
fer; but  the  deed  contained  a  license  to  the  grantee  to  enter  upon 
the  property,  and  that  license,  when  acted  upon,  took  effect  in- 
dependently of  the  transfer." 

I  have  thought  it  right  to  dwell  a  little  upon  these  cases,  both 
on  account  of  some  expressions  which  were  used  in  argument  re- 
specting them,  and  also  because  in  determining  the  present  ques- 
tion it  is  useful  to  ascertain  the  precise  limits  of  the  doctrine  as  to 
the  assignment  of  future  property  at  law.  The  decree  appealed 
against  proceeds  upon  the  ground,  not  indeed  that  an  assignment 
of  future  property,  without  possession  taken  of  it,  would  be  void 
in  equity  (as  the  cases  to  which  I  have  referred  show  that  it  would 
be  at  law),  but  that  the  equitable  right  is  incomplete  and  imperfect 
unless  there  is  subsequent  possession,  or  some  act  equivalent  to  it 
to  perfect  the  title. 

In  considering  the  case,  it  will  be  unnecessary  to  examine  the 
authorities  cited  in  argument,  to  show  that  if  there  is  an  agree- 
ment to  transfer  or  to  charge  future  acquired  property,  the  prop- 
erty passes,  or  becomes  liable  to  the  charge  in  equity,  where  the 
question  has  arisen  between  the  parties  to  the  agreement  them- 
selves. In  order  to  determine  whether  the  equity  which  is  created 
under  agreements  of  this  kind  is  a  personal  equity  to  be  enforced 
by  suit,  or  to  be  made  available  by  some  act  to  be  done  between 
the  parties,  or  is  in  the  nature  of  a  trust  attaching  upon  and  bind- 
ing the  property  at  the  instant  of  its  coming  into  existence,  we 
must  look  to  cases  where  the  rights  of  the  third  persons  inter- 
vene. ... 

The  judgment  of  Lord  Campbell  resting,  as  he  states,  upon 
Lord  Bacon's  maxim,  determines  that  some  subsequent  act  is 
necessary  to  enable  "the  equitable  interest  to  prevail  against  a 
legal  interest  subsequently  bona  fide  acquired."  It  is  agreed  that 
this  maxim  relates  only  to  the  acquisition  of  a  legal  title  to  future 
property.  It  can  be  extended  to  equitable  rights  and  interests 
(if  at  all)  merely  by  analogy;  but  in  thus  proposing  to  enlarge  the 
sphere  of  the  rule,  it  appears  to  me  that  sufficient  attention  has 
not  been  paid  to  the  different  effect  and  operation  of  agreements 
relating  to  future  property  at  law  and  in  equity.  At  law  property^ 
non-existing,  but  to  be  acquired  at  a  fut_ure  time,  is  not  assignable; 
inTquity  it  is  so.  Atlaw  (as  we  have  seen),  although  a  power  is 
given  in  the  deed  of  assignment  to  take  possession  of  after-acquired 


HOLROYD    V.    MARSHALL  35 

property,  no  interest  is  transferred,  even  as  between  the  parties 
J_heiPP^lv<^s,  unlesFpossession  is  actually  taken;  in  equity  it  is  n'ot 
_disputed  that  thp  mnmpry^the  property  comes  into  existence  the 
agreement  operates  upon  it. 

[The  noble  and  learned  Lord  then  discusses  the  case  of 
Whitworth  v.  Gaugain,  1  Phill.  728,  and  concludes  as  fol- 
lows :] 

Whatever  doubts,  therefore,  may  have  been  formerly  enter- 
tained upon  the  subject,  the  right  of  priority  of  an  equitable  mort- 
gagee  over  a  judgment  creditor,  though  without  notice,  mayTimrbe 
consideredto  be_fi£mly-4istablislied;  and,  according  to  the  opinion 
of  Lord  St.  Leonards,  "any  agreement  binding  property'  for  valu- 
able consideration"  will  confer  a  similar  right. 

3vit  if  it  should  stilTbe  thought  that  the_d£.ed^  ^^ngPfheL-With  the 
act  of  bringing  the  machinery  on  the  premises,  were  not  sufficient 
to  complete  the  mortgagee's  title,  it  may  be  asked  what  more 
could  have  been  done  for  this  purpose.  The  trustee  could  not 
take  possession  of  the  new  machinery,  for  that  would  have  been 
contrary  to  the  provisions  of  the  deed  under  which  Taylor  was  to 
remain  in  possession  until  default  in  payment  of  the  mortgage 
money  after  a  demand  in  writing,  or  until  interest  should  have  be- 
come in  arrear  for  three  months;  and  in  either  of  these  events  a 
power  of  sale  of  the  machinery  might  be  exercised.  And  if  the 
intervenient  act  to  perfect  the  title  in  trust  be  one  proceeding  from 
the  mortgagor,  what  stronger  one  could  be  done  by  him  than  the 
fixing  and  placing  the  new  machinery  in  the  mill,  by  which  it  be- 
came, to  his  knowledge,  immediately  subject  to  the  operation  of 
the  deed? 

I  asked  Mr.  Amphlett,  upon  the  second  argument,  what  novus 
actus  he  contended  to  be  necessary,  and  he  replied  "a  new  deed." 
But  this  would  be  inconsistent  with  the  terms  of  the  original  deed, 
which  embraces  the  substituted  machinery,  and  which  certainly 
was  operative  upon  the  future  property  as  between  the  parties 
themselves.  And  it  seems  to  be  neither  a  convenient  nor  a  reason- 
able view  of  the  rights  acquired  under  the  deed,  to  hold  that  for 
any  separate  article  brought  upon  the  mill  a  new  deed  was  neces- 
sary, not  to  transfer  it  to  the  mortgagee,  but  to  protect  it  against 
the  legal  claims  of  third  persons. 

But  if  something  was  still  requisite  to  be  done,  and  that  by  the 
mortgagor,  I  cannot  help  thinking  that  the  account  delivered  by 
Taylor  to  the  mortgagees  of  the  old  machinery  sold,  and  of  the  new 
machinery  which  was  added  and  substituted,  was  a  sufficient  novus 


36  CONVEYANCE 

actus  interveniens,  amounting  to  a  declaration  that  Taylor  held 
the  new  machinery  upon  the  trusts  of  the  deed. 

Lord  Wensleydale.  My  noble  and  learned  friend  will  forgive 
me,  but  that  was  not  mentioned  in  the  bill. 

Lord  Chelmsford.  My  noble  and  learned  friend  is  quite  cor- 
rect in  that ;  it  must  be  taken  that  that  was  not  mentioned  in  the 
bill,  and  that  was  the  answer  given  when  I  urged,  in  the  course  of 
the  argument,  that  that  account  must  be  taken  to  be  a  sufficient 
actus.  But  still  I  am  stating  what  my  views  are  of  the  whole  of  the 
case.  I  think  that  the  account  delivered  by  Taylor  to  the  mort- 
gagees of  the  whole  machinery  which  was  added  and  substituted, 
was  a  sufficient  novus  actus  interveniens,  amounting  to  a  declaration 
that  Taylor  held  the  new  machinery  upon  the  trusts  of  the  deed, 
the  only  act  which  could  be  done  by  him  in  conformity  with  it; 
and  it  is  difficult  to  understand  for  what  other  reason  such  an  ac- 
count should  have  been  rendered.  As  between  themselves,  it  is 
quite  clear  that  a  new  deed  of  the  added  and  substituted  machinery 
was  unnecessary;  no  possession  could  be  delivered  of  it,  because 
it  would  have  been  inconsistent  with  the  agreement  of  the  parties; 
and  anything,  therefore,  beyond  this  recognition  of  the  mort- 
gagee's right  appears  to  be  excluded  by  the  nature  of  the  transac- 
tion. 

1  will  add  a  very  few  words  on  the  subject  of  the  notice  of  the 
claim  of  the  mortgagees  to  the  judgment  creditor.  I  think  that 
the  equitable  title  would  prevail  even  if  the  judgment  creditor  had 
no  notice  of  it,  according  to  the  authorities  which  have  been  al- 
ready observed  upon.  It  is  true  that  Lord  Cottenham,  in  the  case 
of  Metcalfv.  The  Archbishop  of  York,  1  Mylne  &  C.  547,  555,  said 
that  if  the  plaintiff,  in  that  case,  was  entitled  to  the  charge  upon 
the  vicarage  under  the  covenant  and  charge  in  the  deed  of  1811, 
"then,  as  the  defendants  had  notice  of  that  deed  before  they  ob- 
tained their  judgment,  such  charge  must  be  preferred  to  that  judg- 
ment." This  appears  to  imply  that  his  opinion  was,  that  if  the 
judgment  creditor  had  not  had  notice,  he  would  have  been  entitled 
to  priority.  Much  stress,  however,  ought  not  to  be  laid  upon  an 
incidental  observation  of  this  kind,  where  notice  had  actually 
been  given,  and  where,  therefore,  the  case  was  deprived  of  any 
such  argument  in  favor  of  the  judgment  creditor.  If  Lord  Cotten- 
ham really  meant  to  say  that  notice  by  the  judgment  creditor  of 
the  prior  equitable  title  was  necessary  in  order  to  render  it  avail- 
able against  him,  his  opinion  is  opposed  to  the  decisions  which 
have  established  that  a  judgment  creditor,  with  or  without  notice, 


HOLROYD    V.    MARSHALL 


37 


must  take  the  property,  subject  to  every  liability  under  which  the 
debtor  held  it. 

The  present  case,  however,  meets  any  possible  difficulty  upon 
the  subject  of  notice,  because  it  appears  that  the  deed  was  regis- 
tered as  a  bill  of  sale,  under  the  provisions  of  the  17  &  18  Vict.,  c. 
36.  It  was  argued  that  this  Act  was  intended  to  apply  to  bills 
of  sale  of  actual  existing  property  only,  and  it  probably  may  be 
the  case  that  sales  of  future  property  were  not  within  the  contem- 
plation of  the  Legislature;  but  there  is  no  ground  for  excluding 
them  from  the  provisions  of  the  Act;  and  upon  the  question  of 
notice,  the  register  would  furnish  the  same  information  of  the 
dealing  with  future  as  with  existing  property,  which  is  all  that  is 
required  to  answer  the  objection. 

I  think  that  the  late  Lord  Chancellor  was  right  in  holding  that 
if  actual  possession  of  the  machinery  in  question  before  the  sher- 
iff's officer  entered  was  necessary,  there  was  no  proof  of  such  pos- 
session having  been  taken  on  behalf  of  the  mortgagee.  But  upon 
a  careful  consideration  of  the  whole  case,  I  am  compelled  to 
differ  with  him  upon  the  ground  on  which  he  ultimately  reversed 
Yice-Chancellor  Stuart's  decree.  I  think,  therefore,  that  his 
decree  should  be  reversed,  and  that  of  the  Vice-Chancellor 
affirmed.^ 

1  In    Tailby    v.    Official    R^ceii'er,  account  and  that  this  is  neither  to.. 

L.  R.  13  A.  C.  523  (1888),  a  manufac-  vague  nor  indefinite,  citing  the  prin- 

turer  made  an  assignment  for  valu-  cipal  case. 

able  consideration  of  all  his  stock  in  See,  also,  lUingworth  v.  Houlds- 
trade,  fixtures,  furniture  and  ma-  ivorth  [1904],  A.  C.  355. 
chinery  in  or  about  certain  designated  In  Ferguson  v.  Wilson,  122  Mich, 
premises  or  any  other  place  or  places  97,  80  N.  W.  1000  (1899),  a  chattel 
at  which  during  the  continuance  of  mortgage  was  given  on  certain  desig- 
the  security  he  might  carry  on  nated  property  which  also  provitled 
business,  "and  also  all  book  debts  that  it  should  cover  "all  other  per- 
due and  owing  or  which  during  the  sonal  property  which  1  may  own  or 
continuance  of  this  security  become  acquire  during  said  years."  The 
due  and  owing  to  the  said  mort-  objection  was  urged  that  this  clause 
gagor."  The  objection  was  urged  would  not  embrace  property  after- 
that  an  assignment  of  future  book  wards  acquired  having  no  connection 
debts  not  limited  to  any  specific  with  the  property  owned  by  the  mort- 
business  was  too  vague  to  have  any  gagor  at  the  time  of  the  giving  of  the 
effect  since  it  was  without  any  de-  mortgage.  The  court  sustained  this 
limitation  as  to  time,  place  or  amount.  objection  holding  that,  whatever 
The  House  of  Lords  held  that  this  might  be  the  rule  as  between  the 
objection  should  be  overruled,  de-  parties  themselves,  the  mortgage 
daring  that  an  individual  may  con-  did  not  create  a  valid  lien  upon  after- 
tract  to  assign  all  his  future  book  acquired  property  not  connected  with 


38  CONVEYANCE 

MOODY  V.  WRIGHT 

Supreme  Judicial  Court  of  Massachusetts,  1847 

(13  Metcalf,  17) 

This  was  a  petition,  under  St.  1838,  c.  163,  §  18,  for  the  inter- 
position of  the  Court,  as  a  court  of  chancery,  in  behalf  of  a  creditor 
of  two  insolvent  partners.  The  petitioner  alleged  that  Horace 
Wright  and  Benjamin  B.  Hoxse,  tanners,  and  partners  in  business, 
applied  to  the  Judge  of  Probate  for  the  County  of  Hampshire,  in 
December,  1846,  for  the  benefit  of  the  insolvent  laws,  and  that  such 
proceedings  were  had,  upon  their  application,  that  all  their  estate 
was  assigned  to  the  defendant,  as  assignee :  That  the  petitioner,  in 
July,  1839,  sold  and  delivered  to  said  Wright  &  Hoxse,  hides,  skins 
and  bark,  for  the  sum  of  !$2374.34,  on  credit,  and  took  their  prom- 
issory note  therefor,  payable  in  four  months,  with  annual  in- 
terest, and  also  took  a  mortgage  of  said  property,  and  of  other 
property,  which  mortgage  was  duly  recorded,  and  by  which  they 
secured  to  the  plaintiff  whatever  hides,  skins,  bark  or  stock,  which 
might  afterwards  belong  to  them,  wherever  situated,  and  whether 
manufactured  or  not,  and  whether  at  market  or  not,  or  the  pro- 
ceeds of  the  same,  if  sold,  and  also  all  leather  thereafter  manu- 
factured from  the  proceeds  of  the  property  then  on  hand,  and  in 
whatever  shape  it  might  afterwards  exist,  or  whatever  form  it 
might  assume,  so  that  the  then  present  and  future  earnings  of  the 
said  Wright  &  Hoxse's  tan  works,  both  stock  and  proceeds,  and 
whether  sold  or  unsold,  might  stand  conveyed,  pledged  and  hy- 
pothecated to  the  petitioner,  for  the  payment  of  said  purchase 
money  and  note:  That  said  note  and  mortgage  had  never  been  satis- 
fied, discharged  or  cancelled,  and  that  their  validity  had  been  re- 
peatedly recognized  and  confirmed  by  said  Wright  &  Hoxse,  by 
the  payment,  and  indorsement  on  the  note,  of  the  annual  interest 
thereby  secured:  That  the  petitioner,  at  the  first  meeting  of  the 
creditors  of  said  Wright  &  Hoxse,  presented  a  petition  to  said  judge 
of  probate,  setting  forth  the  facts  above  mentioned,  and  also  stat- 
ing that  the  property  intended  to  be  secured  by  the  mortgage 
aforesaid  had  been  taken  by  the  messenger,  under  the  warrant  is- 
sued according  to  the  provisions  of  the  insolvent  laws,  and  praying 
that  said  property  might  be  sold,  and  the  proceeds  thereof  applied 

the  business  in  which  the  mortgagor      mortgage,  as  against  subsequent  good- 
was  engaged  at  the  time  of  giving  the      faith  purchasers  or  attaching  creditors. 


MOODY  V.   WRIGHT  39 

to  the  pajTTiPnt  of  said  note,  and  that  he  might  be  admitted  as  a 
creditor  for  the  residue,  if  any;  referring  to  the  schedules  and  return 
of  the  messenger  for  a  description  of  the  property  to  be  sold ;  but 
that  said  judge  of  probate  "did  order  and  decree  that  the  prayer 
of  said  petition  should  not  be  granted:"  That  a  large  amount  of 
the  property  intended  to  be  conveyed  and  hypothecated,  as  afore- 
said, was  taken  by  said  messenger,  and  afterwards  by  the  defend- 
ant, as  assignee,  in  behalf  of  the  general  creditors  of  said  Wright  & 
Hoxse :  That  although,  in  the  course  of  the  business  of  said  Wright 
&  Hoxse,  the  identical  property  which  was  sold  and  delivered  to 
them,  as  aforesaid,  by  the  petitioner,  was  changed  into  other  forms, 
yet  the  proceeds  thereof  were  so  used  and  invested  as  to  assume  the 
form  of  and  become  the  property  thus  taken  by  said  messenger  and 
the  defendant;  that  said  property,  thus  taken  and  held  by  force 
of  said  mortgage,  was  a  portion  of  the  property  and  earnings  of 
Wright  &  Hoxse's  tan  works,  and  was  described  in  said  mortgage, 
and  therein  pledged  and  hypothecated  to  the  petitioner;  and  that 
said  Wright  and  Hoxse  continued  their  business  as  tanners  until 
said  warrant  issued. 

The  petitioner's  prayer  was,  that  the  property  aforesaid,  taken  by 
the  defendant,  as  assignee,  or  the  proceeds  thereof,  might  be  ap- 
plied towards  the  payment  of  said  note,  and  that  he  might  be  ad- 
mitted as  a  creditor,  for  the  residue  thereof,  if  any,  according  to  the 
provisions  of  St.  1838,  c.  163,  §  3;  and  that  such  other  order  or 
decree  might  be  made  in  the  premises,  as  law  and  justice  might 
require. 

The  answer  of  the  respondent  averred,  that  all  the  property  be- 
longing to  the  said  Wright  &  Hoxse,  at  the  date  of  said  note  and 
mortgage,  was  afterwards,  from  time  to  time,  disposed  of  by  them, 
at  their  pleasure,  and  that  at  no  time  between  the  date  of  said  mort- 
gage and  the  taking  of  their  property  by  the  defendant,  as  assignee, 
did  they  ever  set  apart  to  the  petitioner  any  specific  portion  of 
their  property,  which  might  have  been  purchased,  if  any  was  so 
purchased,  with  the  proceeds  of  the  property  included  in  said 
mortgage;  nor  did  they  ever  account  to  the  petitioner,  specifically, 
for  the  proceeds  of  the  same,  or  any  part  thereof;  nor  did  they, 
in  the  purchase  and  acquisition  of  stock,  or  other  property  which 
might  have  belonged  or  come  to  them,  after  the  date  of  said  mort- 
gage, make  any  distinction  between  such,  if  any,  as  was  purchased 
or  acquired  with  the  specific  proceeds  of  the  property  belonging 
to  them  when  said  mortgage  was  executed,  and  that  which  was  the 
proper  fruit  of  their  own  personal  labor,  money  and  income,  or 


40  CONVEYANCE 

which  accrued  to  them  from  any  other  source  than  the  sale  of  said 
hypothecated  property.  Wherefore  the  respondent  prayed  that 
the  decree  of  the  Judge  of  Probate  might  be  affirmed. 

Dewey,  J.  The  instrument  offered  in  evidence  by  the  petitioner, 
as  the  foundation  of  his  claim,  purports  to  convey  to  him  certain 
articles  of  personal  property,  consisting  of  hides,  skins  and  bark, 
all  then  in  existence,  and  in  possession  of  the  grantors,  and  also 
whatever  hides,  skins,  bark  or  stock,  of  whatever  description,  that 
may  hereafter  belong  to  the  grantors,  wherever  situated,  and 
whether  manufactured  or  not,  and  at  market  or  not,  or  the  pio- 
ceeds  if  sold;  also,  all  leather  thereafter  manufactured  from  the 
proceeds  of  property  then  on  hand,  and  in  whatever  shape  the 
property  might  thereafter  exist,  or  whatever  form  it  might  assume; 
so  that  the  then  present  and  future  property  and  earnings  of  the 
tan  works  might  stand  conveyed,  pledged  and  hypothecated  to  the 
petitioner. 

This  instrument,  so  far  as  it  purports  to  mortgage  the  property 
of  the  mortgagors  then  in  existence,  and  held  by  them,  was  in  all 
respects  a  valid  instrument;  and  if  any  such  property  now  remains 
for  it  to  operate  upon,  it  will  be  effectual  to  pass  the  same  to  the 
petitioner.  We  understand,  however,  that  the  case  shows  no  such 
property  in  the  hands  of  the  assignee,  and  that  the  specific  property 
conveyed  by  the  petitioner  to  Wright  &  Hoxse,  and  by  them  re- 
conveyed  in  mortgage  to  him,  has  no  longer  any  existence,  and  that 
the  only  ground  of  sustaining  this  petition  is  that  of  a  lien  upon 
subsequently  acquired  property,  which  had  no  existence  at  the 
time  of  the  execution  of  the  mortgage,  and  which  has  no  other  con- 
nection with  it,  than  that,  to  some  extent,  it  may  have  been  pur- 
chased with  funds  which  were  the  proceeds  of  various  sales  from 
the  tannery;  first,  of  the  articles  purchased,  and  their  proceeds 
applied  to  the  purchase  of  new  stock,  which,  when  manufactured, 
was  again  sold,  and  its  proceeds  invested;  and  so  from  time  to 
time.  This  instrument  is  clearl}^,  therefore,  an  attempt  to  mort- 
gage or  hypothecate  after  acquired  property.  Can  such  securitj^ 
be  made  effectual  by  the  making  and  recording  of  such  instrument, 
without  any  further  act  of  the  parties,  with  no  delivery  by  the 
mortgagor,  and  no  act  on  the  part  of  the  mortgagee,  taking  pos- 
session or  exercising  any  rights  of  property  in  the  newly  acquired 
articles,  by  virtue  of  the  provisions  in  the  mortgage  as  to  property? 
.  This  subject  has  been  recently  before  us,  in  the  case  of  Jones  v. 
Richardson,  10  Met.  481,  involving  the  question  as  to  the  validity 


MOODY    V.    WRIGHT  41 

of  such  a  mortgage  in  a  court  of  law.  The  subject  was  very  ma- 
turely considered,  and  the  Court  were  all  clearly  of  opinion  that 
such  mortgage  did  not  pass  after  acquired  propertJ^  It  was  stated, 
in  that  case,  as  an  elementary  principle,  that  "a  person  cannot 
grant  or  mortgage  property  of  which  he  is  not  possessed,  and  to 
which  he  has  no  title."  All  the  qualification  introduced  was,  that 
one  may  grant  personal  property  of  which  he  is  potentially,  though 
not  actually,  possessed,  as  in  the  case  of  the  grant  of  all  the  wool 
that  shall  grow  on  the  sheep  he  owns  at  the  time  of  the  grant,  but 
not  wool  which  shall  grow  on  sheep  which  are  not  his,  but  which 
he  may  afterwards  buy. 

In  our  opinion  these  principles  as  to  conveyance  of  property  are 
equalh'  sound  and  equally  to  be  enforced,  whether  the  question  as 
to  the  right  of  property  is  raised  in  a  court  of  law  or  of  equity. 
The  parties  appear  before  us,  each  claiming  the  property  by  con- 
veyance; the  petitioner  by  the  instrument  already  recited,  and  the 
defendant  as  assignee,  holding  by  virtue  of  a  deed  from  a  master 
in  chancer}'-,  for  the  benefit  of  all  the  creditors  of  Wright  &  Hoxse. 
^A'hether  it  would  reall}'  be  more  equitable,  in  a  case  like  the  pres- 
ent, that  the  after  acquired  property  should  be  holden  by  the  one 
party  or  the  other;  whether  the  claims  of  the  individual  creditor 
would,  in  an  equitable  view,  be  more  meritorious  than  those  of 
the  entire  body  of  creditors,  seeking  a  distribution  p:  o  rata,  would 
depend,  not  so  much  on  anything  disclosed  on  the  face  of  the  mort- 
gage, as  upon  a  full  knowledge  of  the  entire  course  of  business  of 
the  mortgagor,  and  the  circumstances  appertaining  to  the  prop- 
erty which  is  now  the  subject  of  controversy,  the  mode  of  its  ac- 
cjuisition,    &c. 

Supposing  ourselves  clothed  with  full  equity  powers,  and  treat- 
ing this  case  as  before  us  unembarrassed  by  any  question  as  to  our 
limited  jurisdiction  in  chancer}',  we  are  not  satisfied  that  the  pe- 
titioner has  shown  any  such  title  to  this  jiroperty  as  would  authoi- 
ize  us  to  hold  it  to  be  subject  to  a  lien  for  the  note  of  Wright  & 
Hoxse  to  the  petitioner,  as  against  creditors  who  have  acquired  a 
right  to  it  before  any  act  of  the  petitioner  had  taken  place,  reduc- 
ing the  property  to  his  possession,  or  by  asserting  effectually  any 
right  under  the  prospective  hypothecation,  as  by  making  a  claim 
and  taking  possession  under  it,  while  in  the  possession  of  Wright 
&  Hoxse.  There  are  doubtless  equitable  liens  which  may  be  en- 
forced in  courts  of  equity,  though  hot  available  in  a  court  of  law. 
Many  such  might  be  enumerated.  That  which  nearest  approaches 
the  present  case  is  that  of  an  agreement  to  convey  property,  or 


42  CONVEYANCE 

do  some  act,  the  performance  of  which  has  been  casually  postponed ; 
and  in  dealing  with  the  rights  of  the  parties  in  such  case,  a  court 
of  equity  will  consider  a  thing  done  which  was  agreed  to  be  done. 
That  class  of  cases  does  not  present,  however,  the  difficulties  that 
arise  in  the  present  case.  The  property  which  is  the  subject  of 
the  agreement,  in  the  case  supposed,  was  in  existence,  and  the 
power  to  convey  the  same,  or  stipulate  for  a  conveyance,  existed. 

The  difficulty  that  presses  in  the  present  case  is  the  want  of 
any  binding  original  contract,  which  per  se  could  have  force  and 
effect  to  change  the  after  acquired  property,  without  some  further 
act  by  the  parties,  after  the  property  should  have  come  into  exist- 
ence. Such  act  we  deem  to  have  been  necessary  to  perfect  the 
title  of  the  petitioner,  whether  his  rights  of  property  in  such  after 
acquired  articles  are  sought  to  be  enforced  in  equity  or  at  law. 
We  are  fully  aware  that  a  different  view  of  this  question  was  taken 
by  Mro  Justice  Story  in  the  case  of  Mitchell  v.  Winslow,  2  Story, 
R.  630,  and  that  the  result  to  which  he  came  differs  from  ours 
as  to  the  effect  to  be  given  to  such  mortgages  in  a  court  of  equity.^ 
In  relation  to  that  case,  it  is  supposed  by  the  counsel  for  the  pe- 
titioner, that  it  had,  to  some  extent,  the  sanction  of  this  Court, 
in  the  remarks  of  the  judge  who  delivered  the  opinion  in  the  case 
of  Jones  V.  Richardson.  But  we  apprehend  that  no  such  view  was 
intended  to  be  suggested.  The  case  then  before  the  Court  was  an 
action  at  law;  and  the  obvious  and  quite  sufficient  answer  to  the 
case  of  Mitchell  v.  Winslow  which  was  relied  upon  by  the  then 
plaintiffs,  was  "that  was  a  case  in  equity,"  without  entering  upon 
the  further  inquiry  whether  we  should,  as  a  court  of  equity,  in  a 
case  before  us,  come  to  the  same  result. 

The  result  to  which  we  have  come,  upon  the  present  petition, 
may  be  stated  in  the  following  propositions:  The  petitioner  can- 
not hold  the  property  in  controversy,  as  mortgaged  property, 
because  it  was  not  in  existence,  and,  therefore,  not  capable  of  being 
conveyed  in  mortgage,  at  the  time  when  the  mortgage  was  made. 
The  instrument  could  not  operate  to  pass  the  property  as  a  pledge, 

'  1  "It  seems  to  me  a  clear  result  of  or  charge  upon  the  particular  prop- 
all  the  authorities  that  wherever  the  erty  as  soon  as  the  assignor  or  con- 
parties  by  their  contract  intended  to  tractor  acquires  a  title  thereto, 
create  a  positive  lien  or  charge,  either  against  the  latter  and  all  persons 
upon  real  or  upon  personal  property,  asserting  a  claim  thereto  under  him, 
whether  then  owned  by  the  assignor  either  voluntarily,  or  with  notice, 
or  contractor  or  not,  or,  if  personal  or  in  bankruptcy." — Per  Story,  J., 
property,  whether  it  is  then  in  esse  in  Mitchell  v.  Winslow,  2  Story,  630, 
or  not,  it  attaches  in  equity  as  a  lien  644  (1843). 


MOODY   V.    WRIGHT  43 

because  the  custody  of  the  same  was  not  taken  and  retained  by  the 
pledgee.  The  property  cannot  be  held  as  charged  with  a  lien,  be- 
cause a  lien  cannot  be  created  by  an  executory  agreement  without 
being  accompanied  by  possession  or  delivery  of  the  property. 
A  stipulation  that  future  acquired  property  shall  be  holden  as 
security  for  some  present  engagement,  is  an  executory  agreement, 
of  such  a  character,  that  the  creditor  with  whom  it  is  made  may, 
under  it,  take  the  property  into  his  possession,  when  it  comes  into 
existence,  and  is  the  subject  of  transfer  by  his  debtor,  and  hold  it 
for  his  security;  and  whenever  he  does  so  take  it  into  his  posses- 
sion, before  any  attachment  has  been  made  of  the  same,  or  any 
alienation  thereof,  such  creditor,  under  his  executory  agreement, 
may  hold  the  same;  but,  until  such  an  act  is  done  b^'  him,  he  has  no 
title  to  the  same;  and  that,  such  act  being  done,  and  the  possession 
thus  acquired,  the  executory  agreement  of  the  debtor  authorizing 
it,  it  will  then  become  holden  by  virtue  of  a  valid  lien  or  pledge. 
The  executory  agreement  of  the  owner,  in  such  a  case,  is  a  contin- 
uing agreement,  so  that  when  the  creditor  does  take  possession 
under  it,  he  acts  lawfully  under  the  agreement  of  one  then  having 
the  disposing  power,  and  this  makes  the  lien  good.  If,  however, 
before  taking  possession,  or  doing  such  acts  as  are  necessary  to 
give  vitality  to  the  mortgage,  as  to  the  subsequently  acquired 
property,  an  attachment  or  assignment  for  the  benefit  of  creditors 
takes  place,  the  opportunity  for  completing  the  lien  is  lost,  and  the 
mortgage  or  pledge  not  being  perfected,  the  property  passes  to  the 
assignee,  and  must  be  held  by  him  for  the  benefit  of  the  creditors 
generally. 

There  was  no  act  done  by  the  petitioner  and  by  Wright  &  Hoxse 
jointly,  or  by  either  of  the  parties,  which  was  sufficient  to  give 
effect  to  the  original  mortgage,  as  to  the  after  acquired  property. 
The  recording  of  the  mortgage  by  the  petitioner  did  not;  for  that 
was  before  such  property  was  acquired.  The  annual  pajment  of 
interest  by  Wright  &  Hoxse  could  have  no  such  effect.  It  was 
neither  actually  nor  sjTnbolically  accepting  the  transfer  or  convey- 
ance of  the  articles  after  they  were  acquired  by  Wright  &  Ho.xse, 

In  no  way,  that  we  perceive,  can  we  give  effect  to  this  contract, 
so  as  to  give  the  petitioner  the  lien,  upon  the  after  acquired  prop- 
erty, that  he  seeks  to  establish. 


Petition  dismissed  with  costs. 


» Followed,  Lou;  V.  Pew,  108  Mass.       v.    Denny,    130    Mass.    566    (1881). 
347    (1871);    Chynoweth    v.    Tenney,  In  Federal  Tnist  Company  v.  Bristol 

10  Wia.  397  (1860).     But  see  Chase      County  Street  Railway  Co.,  222  Mass. 


44 


CONVEYANCE 


SMITH URST  V.   EDMUNDS 


Court  of  Chancery  of  New  Jersey,  1862 

(14  A'.  J.  Eq.  408) 

The  Chancellor.  The  complainant,  being  the  owner  of  the 
Columbia  House  hotel,  at  Cape  Island,  with  its  appurtenances,  and 
of  the  furniture  therein,  and  being  in  possession  of  the  premises, 
by  an  indenture  bearing  date  on  the  seventh  of  June,  1860,  leased 
the  real  estate  to  James  H.  Laird,  for  the  term  of  three  years 
from  the  first  of  May,  1860,  at  the  yearly  rental  of  $5000,  payable 
in  equal  installments,  on  the  fifteenth  day  of  July  and  thirty-first 
day  of  August  in  each  year,  and  sold  and  transferred  to  the  lessee, 
the  furniture  and  other  household  articles  for  the  sum  of  $5563.42. 
Laird,  as  the  lessee,  as  a  cpllateral  security  for  the  punctual  pay- 
ment of  the  rent,  resold  and  retransferred  to  the  lessor  all  of  said 


35    (1915),    RuGG,    C.    J.,    said    at 
pp.  45-46: 

"As  an  abstract  propo-sition,  the 
ruling  that  the  mortgage  as  supple- 
mented did  not  cover  personal  prop- 
erty acquired  after  the  date  of  the 
supplemental  indenture  in  August, 
1901,  was  correct.  The  mortgagee 
did  not  take  possession  of  any  of 
this  property  by  virtue  of  the  power 
conferred  by  the  mortgage.  By  no 
written  instrument  executed  subse- 
quent to  its  purchase  was  it  brought 
under  the  hen  of  the  mortgage. 
Under  the  general  principle  of  law 
well  established  in  this  Common- 
wealth such  after  acquired  personal 
property  did  not  become  subject  to 
the  mortgage  either  at  law,  Jones  v. 
Richardson,  10  Met.  481;  Low  v. 
Pew,  108  Ma.ss.  347,  or  in  equity, 
Moody  V.  Wright,  13  Met.  17;  Blanch- 
ard  V.  Cooke,  144  Mass.  207;  Wasser- 
man  v.  McDonnell,  190  Mass.  326; 
Schlatter  v.  Young,  197  Mass.  36; 
Harrirnan  v.  Wohurn  Electric  Light 
Co.,  163  Mass.  85.  Doubtless  the 
general  rule  in  equity  elsewhere  is 
contrary  to  our  ovm.     See  Central 


Trust  Co.  v.  Kneelaiid,  138  U.  S.  414, 
419;  Bear  Lake  Irrigation  Co.  v. 
Garland,  164  U.  S.  1,  15;  Augusta 
Trust  Co.  V.  Federal  Trust  Co.,  82 
C.  C.  A.  309,  312;  People's  Trust  Co. 
V.  Schenck,  195  N.  Y.  398.  Whatever 
may  be  the  rule  in  other  jurisdictions, 
the  law  is  too  firmly  settled  in  this 
Commonwealth  to  be  uprooted  by 
judicial  decision." 

In  Humphrey  v.  Tatman,  198  U.  S. 
91  (1904),  held,  taking  possession  of 
after  acquired  property  within  four 
months  of  the  filing  of  petition  in 
bankruptcy,  under  a  mortgage  ma<le 
in  good  faith  prior  to  that  period,  is 
valid  against  the  trustee  in  bank- 
ruptcy according  to  the  law  of 
Massachusetts, — the  court  deciding 
that  the  time  of  the  intervening  act 
was  immaterial,  provided  that  the 
original  mortgage  was  given  before 
the  four  months  preceding  the  bank- 
ruptcy. This  decision  reversed  the 
Supreme  Judicial  Court  of  Massa- 
chusetts, 184  Mass.  361  (1903).  And 
see  Thompson  v.  Fairbanks,  196 
U.  S.  516  (1904). 


SMITHURST   V.    EDMUNDS  45 

furniture  and  other  household  articles,  and  also  sold,  assigned  and 
transferred  and  covenanted  and  agreed  to  sell,  assign  and  transfer 
all  other  articles  of  furniture  which  the  lessee  should  purchase  and 
place,  or  cause  to  be  purchased  and  placed  upon  said  demised 
premises  during  the  said  term,  it  being  then  known  to  and  con- 
templated by  said  parties  that  it  would  be  necessary  for  the  lessee 
to  purchase  and  place  a  large  amount  of  furniture  on  said  premises, 
in  addition  to  that  which  was  then  there,  and  it  l)eing  the  agree- 
ment and  intention  of  said  parties  that  when  and  so  often  as  any] 
additional  furniture  should  be  purchased  and  placed  on  the  prem- 
ises by  the  lessee,  it  should  be  deemed  and  considered  as  belonging ' 
to  the  complainant  as  collateral  security  for  the  payment  of  said 
rent.  And  the  lessee,  among  other  things,  covenanted  and_  agreed 
with  the  lessor  that  the  said  furniture  and  other  household  articles, 
as  well  as  that  which  then  was  on  said  premises  as  that  which 
should  thereafter  be  placed  thereon  by  the  lessee,  should  not  be  . 
sold  or  otherwise  disposed  of,  or  removed  from  said  premises  during 
the  term,  but  should  remain  thereon,  as  the  property  of  the  com- 
plainant, as  collateral  security  for  the  payment  of  said  rent. 

The  bill  charges  that,  in  pursuance  of  the  lease,  the  lessee  en- 
tered upon  the  possession  and  enjoyment  of  the  premises,  and  that 
large  arrears  of  rent  are  due  to  the  complainant;  that  after  the  I 
execution  of  the  lease,  the  lessee,  as  had  been  contemplated,  pur- 
chased and  placed  on  the  demised  premises  a  large  amount  of  fur- 
niture, of  the  value  of  about  S5000,  in  addition  to  that  purchased, 
of  the  complainant,  which  still  remains  thereon.  The  complainant 
insists  that,  by  virtue  of  his  contract  with  the  lessee,  all  the  said 
furniture  belongs  to  him  as  collateral  security  for  the  payment 
of  rent,  and  that  it  cannot  lawfully  be  sold  or  removed  from  the 
said  premises  by  the  said  lessee,  or  by  virtue  of  any  process  or  pro- 
ceedings against  him. 

The  bill  further  charges,  that  sundry  judgments  at  law  have 
been  recovered  against  the  lessee,  and  that,  by  virtue  of  executions 
issued  thereon,  the  sheriff  of  the  County  of  Cape  May  has  levied 
upon  the  said  furniture  on  the  demised  premises,  and  advertised 
the  same  for  sale.    The  bill  prays  that  an  injunction  may  be  issued  \ 
to  restrain  the  sheriff  from  selling  the  said  furniture,  or  any  part    \ 
thereof,  and  from  removing  the  same  from  the  demised  premises.    I 
An  injunction  issued  pursuant  to  the  prayer  of  the  bill.    The  de-  / 
fendant  now  moves  to  dissolve  the  injunction  for  want  of  equity  / 
in  the  bill.  / 

The  question  at  issue  turns  upon  the  validity  and  effect  of  the 


46  CONVEYANCE 

contract  between  the  complainant  and  Laird  relative  to  the  furni- 
ture and  other  household  articles  specified  in  the  agreement.  As 
to  so  much  of  the  furniture  as  was  sold  by  the  complainant  to 
Laird,  and  which  was  upon  the  premises  at  the  date  of  the  lease, 
the  validity  of  the  contract  is  not  called  in  question.  But  in  regard 
to  that  part  of  the  furniture  which  was  not  at  the  time  owned  by 
the  lessee,  but  which  it  was  then  contemplated  should  thereafter 
be  purchased  and  placed  upon  the  premises,  it  is  insisted  that  the 
contract  is  invalid  and  inoperative  (2  Story's  Eq.  Jur.,  §  875;  1 
Eden  on  Inj.,  Waterman,  15  p.  note).  .  .  . 

To  authorize  the  interference  of  the  Court,  the  complainant  must 
show  by  his  bill  the  existence  of  a  right,  legal  or  equitable,  and  the 
danger  of  the  deprivation  of  that  right.  No  fraud  is  imputed  to 
the  parties  in  the  making  of  the  agreement.  It  must  be  assumed 
that  the  contract  was  made  in  good  faith  and  for  the  purpose  of 
securing  a  bona  fide  debt  thereafter  to  grow  due. 

The  objection  is,  that  a  valid  sale  or  transfer  cannot  be  made  of 
chattels  which  at  the  time  of  the  contract  are  not  owned  by  the 
vendor,  and  have  no  actual  or  potential  existence.  It  is  clear  that, 
if  valid  at  all,  the  contract  must  be  valid  as  a  chattel  mortgage. 
It  is  not  a  pledge.  These  chattels  were  not  delivered,  and  they 
r  were  not  capable  of  delivery  at  the  time  of  the  contract.  They 
had  no  existence.  At  l^e  common  law,  there  cannot  be  a  technical 
pledge  of  property  not  then  in  existence  or  to  be  acquired  by  the 
ledgor  infuturo  (Story  on  Bailments,  §§  286,  294). 

It  is  equally  clear  that  the  contract  cannot  operate  as  a  legal 
sale  or  mortgage  of  the  chattels.  To  constitute  a  vahd  sale  at  law, 
the  vendor  must  have  a  present  property,  either  actual  or  potential, 
in  the  thing  sold  {Grantham  v.  Hawley,  Hobart's  R.  132;  Co.  Lit. 
265,  a,  note  1;  Robinson  v.  Macdonnell,  5  Maule  &  S.  228;  2  Kent's 
Com.  468;  1  Parsons  on  Cont.  437;  Story  on  Sales,  §§  185,  186). 

It  is  not  necessary  that  the  vendor  should  have  the  actual  prop- 
erty, or  that  the  chattels  should  have  an  actual  existence.  It  is 
enough  that  he  have  it  potentially.  The  distinction  was  taken  in 
the  early  case  of  Grantham  v.  Hawley,  already  referred  to.  The 
lessor  in  that  case  covenanted  that  the  lessee  of  a  term  might  take 
the  corn  that  should  be  growing  at  the  end  of  the  term.  It  was 
held  that  the  words  were  good  to  transfer  the  property  as  soon 
as  it  was  extant,  the  lessor  of  the  land  having  the  crops  not  actually, 
but  potentially.  So  it  was  said,  a  parson  may  grant  all  the  tithes 
of  wool  that  he  may  have  in  a  certain  year.  But  a  man  cannot 
grant  all  the  wool  that  shall  grow  upon  his  sheep  that  he  shall 


SMITHURST   V.    EDMUNDS  47 

hereafter  buy,  for  there  he  hath  it  neither  actually  nor  potentially. 
The  distinction  will  be  found  recognized  in  most  of  the  leading 
cases,  and  fully  stated  by  the  elementary  writers  already  cited. 

In  this  case  the  lessee  had  neither  actual  nor  potfiatial  property 
in  the  chattels  mortgaged.  They  were  articles  which  it  was  con- 
templated should  be  thereafter  purchased  by  the  lessee,  and  the 
agreement  is,  that  when  and  so  often  as  any  additional  furniture 
shall  be  purchased  and  placed  on  the  premises  by  the  lessee,  it 
shall  belong  to  the  lessor  as  collateral  security  for  the  payment  of 
rent,  and  shall  not  be  sold  or  otherwise  disposed  of  or  removed 
from  the  premises  during  the  term.  It  will  be  assumed,  as  the  au- 
thorities clearly  establish,  that  the  agreement  does  not  constitute 
a  valid  transfer  or  mortgage  at  law  of  the  after  acquired  chattels. 
The  real  question  is,  whether  the  contract  creates  an  equitable^ 
mortgage  of  the  chattels  which  a  court  of  equity  will  enforce  and  ^ 
protect  as  against  a  subsequent  execution  creditor.  .  .  . 

In  the  present  case  the  chattels  were  not  delivered  to  the  mort- 
gagee, but  remained  in  the  possession  of  the  mortgagor.  It  is  true 
the  chattels  were  not  in  the  actual  possession  of  the  lessor,  but  they 
were  delivered  to  the  lessee  upon  the  demised  premises,  where,  in 
accordance  with  the  contemplation  of  the  parties  and  the  terms  of 
the  agreement,  they  were  to  be  used  by  the  tenant,  and  from  which 
they  were  not  to  be  removed  during  the  continuance  of  the  term. 
This  in  no  wise  affected  the  validity  of  the  contract,  but  was  a 
delivery  according  to  the  terms  and  spirit  of  the  contract,  which 
perfected  the  equitable  title  of  the  mortgagee. 

In  the  more  recent  case  of  Mitchell  v.  Winslow,  2  Story's  R. 
680,  this  question  underwent  a  more  elaborate  examination,  by  Mr. 
Justice  Story,  in  the  Circuit  Court  of  the  United  States.  The' 
Court  held  that  to  make  a  grant  or  assignment  valid  at  law,  the 
thing  which  is  the  subject  of  it  must  have  an  existence,  actual  or 
potential,  at  the  time  of  such  grant  or  assignment.  But  the  courts 
of  equity  support  assignments,  not  only  of  choses  in  action,  but  of 
contingent  interests  and  expectations,  and  also  of  things  which 
have  no  present  actual  or  potential  existence,  but  rest  in  mere  possi- 
bility only.  ... 

A  further  question  occurs,  viz.,  wnether,  admitting  the  equitable 
mortgage  to  be  vahd  against  the  mortgagor,  and  all  persons  claim- 
ing under  him  with  notice,  it  will  be  enforced  against  a  subsequent 
judgment  creditor  of  the  mortgagor.  It  was  so  held  by  Vice- 
Chancellor  Wigram  in  the  case  of  Langton  v.  Horton,  1  Hare,  549. 
The  subject  afterwards  underwent  a  more  elaborate  examination 


48  CONVEYANCE 

by  the  same  learned  judge,  in  the  case  of  Whitivodh  v.  Gaugain, 
3  Hare,  416,  where  the  grounds  of  his  conclusion  are  clearly  and 
convincingly  stated.  .  .  . 

The  motion  to  dissolve  the  injunction  is  denied  with  costs. 


LOOKER  V.   PECKWELL 

Supreme  Court  of  New  Jersey,  1876 

(38  A^.  J.  Law,  253) 

In  replevin.    On  error  to  the  Essex  Circuit. 

Van  Syckel,  J.  This  cause  was  tried  in  the  Essex  County  Cir- 
cuit Court,  by  consent  of  parties,  before  the  Court  without  a  jury, 
upon  admitted  facts.  A  brief  statement  will  present  the  point  in 
issue.  One  John  M.  Mackenzie,  to  secure  his  debt  to  the  plaintiff, 
executed  to  him  a  mortgage  upon  the  fixtures,  stock  and  materials, 
&c.,  of  his  bakery  in  Newark,  described  therein  as  follows:  "All 
the  bake-house  fixtures  and  utensils  now  being  in  and  about  my 
bakery,  No.  413  Broad  street;  also,  all  fiour,  &c.,  and  all  other 
stock  manufactured,  and  unmanufactured,  and  all  materials  what- 
soever being  in  and  about  said  bakery,  or  that  may  at  any  time 
during  the  continuance  of  this  mortgage  be  purchased  and  ob- 
tained to  replenish  and  replace  the  same  or  any  part  thereof,  to- 
gether with,"  &c. 

The  mortgage  was  duly  registered,  as  required  by  law.  After 
the  dehvery  of  the  mortgage,  Mackenzie,  in  order  to  replenish  his 
stock,  purchased  twenty  barrels  of  flour,  which  were  delivered  to 
him  on  the  sidewalk  in  front  of  his  bakery,  where  they  were  seized 
by  the  defendant  as  sheriff,  by  virtue  of  an  execution  in  his  hands, 
upon  a  judgment  in  favor  of  Totten  against  said  Mackenzie,  for 
goods  sold  to  him  after  the  making  and  registering  of  the  mort- 
gage, and  before  the  purchase  of  said  twenty  barrels  of  flour,  which 
were  purchased  of  other  parties.  The  question  submitted  on  the 
case  is,  whether  the  twenty  barrels  of  flour  were  subject  to  the 
lien  of  the  mortgage? 

Perkins,  tit.  Grants,  §65,  says:  "It  is  a  common  learning  in 
the  law,  that  a  man  cannot  grant  or  charge  that  which  he  hath  not." 
A  grant  will  operate  only  upon  goods  which  the  grantor  has  actu- 
ally or  potentially  at  the  time  of  the  grant. 

Chief  Justice  Tindall  fully  recognized  this  rule  in  Lunn  v.  Thor- 
ion,  1  Com.  Bench,  379,  which  has  since  been  received  as  authority 


BRETT  V.    CARTER 


49 


both  in  England  and  this  country,  as  appHcable  to  sales  as  well  as 
to  mortgages. 

The  suggestion  of  Chief  Justice  Tindall,  thai  tlie  grant  might 
be  so  framed  as  to  give  the  grantee  a  right  between  themselves  to 
seize  after-acquired  goods  of  the  grantor,  was  acted  upon  in  Con- 
greve  v.  Evetts,  10  Exch.  298;  Hope  v.  Hayley,  5  Ellis  &  B.  830, 
and  in  other  cases  cited  below,  but  the  doctrine  held  in  the  piin- 
cipal  case  has  not  been  shaken;  on  the  contrary,  it  is  in  a  mass  of 
cases  declared  to  be  settled,  if  not  elementary  law  {Gale  v.  Burnell, 
7  Q.  B.  850;  Chidell  v.  Galsworthy,  6  C.  B.  [N.  S.]  471;  Jones  v. 
Richardson,  10  Mete.  481;  Barnard  v.  Eaton,  2  Cush.  294;  Rice  v. 
Stone,  1  Allen,  566;  Low  v.  Pew,  108  Mass.  347;  Van  Hoozer  v.  . 
Cory,  34  Barb.  9;  and  many  other  cases  cited  in  Benjamin  on 
Sales,  §  79,  note  k). 

That  this  is  the  rule  at  law,  is  regarded  by  Chancellor  Green  in 
Smithurst  v.  Edmunds,  1  McCarter,  408,  as  beyond  controversy. 
He  savs  that  to  constitute  a  valid  legal  sale,  the  vendoijiiiisLhave__ 
^preseiit  propertvTeither  actual  or  potential,  in  thejhing  sold.        , 

TEFjudiment  of  the  Court  below  in  favor  of  the  HeFendant  was     ' 
right,  and  should  be  affirmed.  .        ^      k     \     A  rx  -f  \^  ^    «^ 

r^c     LAa*^' BRETT  V.   CARTER 

District  Court  of  the  United  States,  Massachusetts  Dis- 
trict, 1875 

(2  Lmvell,  458) 

Bill  in  equity  by  the  assignee  in  bankruptcy  of  one  Osborne  N. 
Sargent,  against  a  mortgagee  of  the  stock  of  stationery  and  other 
similar  goods.  It  appeared  that  Sargent  bought  out  the  stock  in 
trade  of  the  defendant  Carter,  as  carried  on  by  him  at  a  certain 
place,  in  November,  1874,  and  on  the  same  day  he  gave  back  a 
mortgage  to  secure  the  payment  of  the  purchase  money  by  install- 
ments, represented  by  promissory  notes  extending  over  a  period  of 
four  years.  The  mortgage  conveyed  the  stock  "and  any  other 
goods  which  may  from  time  to  time,  during  the  existence  of  this 
mortgage,  be  purchased  by  the  grantor  and  put  into  said  store  to 
replace  any  part  of  said  stock  which  may  have  been  disposed  of." 
Among  the  covenants  was  one,  that,  if  the  stock  should  be  dimin- 
ished "faster  than  said  sum  hereby  secured  is  paid,  said  grantor 
is  to  furnish  further  security  for  said  sum,  whenever  required  by 
said  grantee." 


50  CONVEYANCE 

Two  of  the  notes  were  duly  paid,  but  one  that  came  due  in  No- 
vember, 1875,  was  not  paid  in  full,  and  the  defendant  demanded 
Aurther  security,  and  a  mortgage  was  given  of  such  stock  as  had 
been  acquired  during  the  year.  This  mortgage  was  given  about 
two  weeks  before  the  petition  in  bankruptcy  was  filed,  and  the 
theory  of  the  bill  was  that  it  was  a  preference.  The  complainants 
afterwards  asked  leave  to  amend,  and  allege  the  first  mortgage  to 
be  void,  on  the  ground  that  the  mortgagor  was  tacitly  permitted  to 
sell  the  goods  in  the  ordinary  course  of  his  trade. 

The  defendant  insisted  that  both  mortgages  were  valid. 

Lowell,  J.  The  Court  of  Appeals  of  New  York  decided,  by  a 
bench  which  was  equally  divided  in  opinion,  that  a  mortgage  of 
chattels  which  permits  the  mortgagor  to  continue  in  possession  and 
to  sell  the  goods  in  the  ordinary  course  of  business,  is  void  on  its 
face,  as  mere  matter  of  law  {Griswold  v.  Sheldon,  4  Comstock, 
581).  This  decision  has  had  a  remarkable  following,  and  its  doc- 
trine appears  to  have  become  the  settled  law  of  New  York,^  Ohio 
and  Illinois.  It  is  not  the  law  of  England,  Maine,  Massachusetts, 
Michigan,  or  Iowa.  In  several  States  it  has  not  been  passed  upon. 
But  as  this  new  doctrine,  or,  rather,  revival  of  an  old  one,  has  been 
said  by  Mr.  Justice  Davis,  of  the  Supreme  Court,  to  be  so  general 
and  just  that  it  may  be  presumed  to  be  the  law  of  Indiana,  in  the 
absence  of  express  and  unambiguous  decisions  of  the  courts  of 
that  State  to  the  contrary,  and  as  I  venture  to  doubt  both  the  gen- 
erality and  the  justice  of  the  doctrine,  it  becomes  me,  with  all  the 
respect  I  feel  for  that  opinion,  to  state  my  reasons  for  not  acceding 
to  it.  If  the  rule,  whichever  way  it  may  be,  were  a  settled  rule  of 
property  in  Massachusetts,  inquiry  into  its  history  or  justice  would 
be  unnecessary;  but  although  I  have  no  doubt  my  decision  will  ac- 
cord with  the  law  of  Massachusetts,  I  have  not  found  a  case  in  this 
State  in  which  the  decisions  in  New  York  were  reviewed,  and  it 
is  possibly  still  a  question  for  discussion. 

I  had  supposed  it  to  be  well  settled,  after  much  debate  and  con- 
flict of  opinion,  certainly,  but  substantially  settled,  that  when  a 
vendor  or  mortgagor  was  permitted  to  retain  the  possession  and 
control  of  his  goods  and  act  as  apparent  owner,  the  question 
whether  this  was  a  fraud  or  not  was  one  of  fact  for  the  jury,  except- 
ing under  a  peculiar  clause  of  the  bankrupt  law  of  England.  It  is 
so  pronounced  by  Mr.  May,  in  his  valuable  treatise  on  Voluntary 

»  See  Zartman   v.    First   National      Bank,  infra.     Cf.  Conkling  v.  Shelley, 

28  N.  Y.  360  (1863). 


BRETT  V.    CARTER  51 

arid  Fraudulent  Conveyances,  p.  126,  and  by  the  cases  he  cites, 
and  by  the  learned  editors,  both  English  and  American,  of  Smith's 
Leading  Cases,  notes  to  Twyne's  Case,  Vol.  I.,  p.  1,  &c.  By  the 
law  of  England,  as  I  understand  it,  there  are  no  constructive  or 
artificial  frauds,  or,  if  the  term  is  preferred,  frauds  in  law,  remain- 
ing, excepting,  first,  such  as  are  expressly  made  so  by  statute; 
as,  for  instance,  when  a  bankrupt  retains  the  order  and  disposition 
of  goods,  as  apparent  owner,  with  the  consent  of  the  true  owner. 
We  have  not  adopted  this  part  of  the  bankrupt  law,  as  was  some- 
what emphatically  said  in  a  late  case  in  the  Supreme  Court, 
Sawyer  v.  Turpin,  91  U.  S.  (1  Otto)  114,  121;  or,  second.  Where 
the  act  is  necessarily  a  fraud  on  creditors,  as  where  an  insolvent 
person  gives  away  a  part  of  his  estate  for  no  valuable  considera- 
tion, or  the  whole  of  it  to  one  antecedent  creditor.  These,  to  be 
sure,  are  examples,  but  very  few  others  could  be  adduced,  and  I 
understand  the  true  law  both  here  and  in  England  to  have  been, 
until  lately,  that  a  conveyance  for  valuable  present  consideration 
is  never  a  fraud  in  law  on  the  face  of  the  deed,  and,  if  fraud  is 
alleged  to  exist,  it  must  be  proved  as  a  fact;  and  that  was  the  law 
even  before  registration  was  required  for  the  benefit  of  persons 
dealing  with  the  mortgagor. 

It  is  very  strange  that  after  our  Legislatures  have  met  the  diffi- 
culty in  Twj^ne's  Case,  by  requiring  registration,  which  gives 
not  only  constructive,  but  in  most  cases  actual  notice  of  mortgages, 
and  when  many  of  them  have  provided  that  fraud  shall  be  a  ques- 
tion of  fact  for  the  jury,  the  decisions  which  I  have  cited,  and 
others  following  them,  should  have  reverted  to  the  harsher  doc- 
trine w^hich  had  already  grow^n  obsolete  before  the  laws  provided 
any  notice  at  all,  or  any  rule  of  evidence  about  fraud. 

It  is  plain  that  such  a  doctrine  virtually  prevents  a  trader  from 
mortgaging  his  stock  at  any  time  for  any  useful  purpose,  for  if  he 
cannot  sell  in  the  ordinary  course  of  trade,  or  only  as  the  trustee 
and  agent  of  the  mortgagee,  he  might  as  well  give  possession  to 
the  mortgagee  at  once  and  go  out  of  business.  In  this  case  he  never 
could  have  begun  business,  for  the  whole  stock  was  supplied  by 
the  defendant.  I  would  refer  in  this  connection  to  the  very  able 
opinions  of  Judge  Dillon  in  Hughs  v.  Cory,  20  Iowa,  399,  and  of 
Judge  Campbell  in  Gay  v.  Bidwell,  7  Mich.  519,  in  which  they 
refuse  to  follow  the  decisions  in  New  York,  and  give  reasons  for 
that  refusal,  which,  in  my  judgment,  are  unanswerable. 

If  it  be  said  that  this  is  one  of  those  cases  in  which  fraud  is  a 
necessary  result  of  the  deed,  all  I  can  say  is  that  this  brings  us  to 


52  CONVEYANCE 

an  ultimate  fact  of  observation  and  experience,  and  I  am  unable  to 
see  the  necessity.  Indeed,  it  is  much  more  difficult  for  me  to  see 
how  creditors  can  be  defrauded  in  such  a  case,  when  they  are  told 
in  the  deed  itself  that  the  debtor  has  no  credit  and  no  property  that 
he  can  call  his  own,  than  that  the  mortgagee  is  most  outrageously 
defrauded  by  such  a  rule,  which  devotes  his  property  to  the  pay- 
ment of  another  person's  old  debts  the  very  instant  that  he  has 
parted  with  the  possession,  taking  back  a  security  which  is  admitted 
to  be  honestly  given.  Take  this  very  case  as  an  illustration.  It  is 
admitted  there  was  no  fraud  in  fact;  that  the  trader's  whole  stock 
was  supplied  by  the  defendant;  that  the  mortgage  shows  that  all 
the  stock,  present  and  future,  is  hypothecated,  not  as  a  cover  or 
blind,  for  there  was  none,  but  to  the  payment  of  a  certain  debt  by 
certain  installments.  No  offer  is  made  to  prove  that  any  one  was 
deceived,  or  even  was  ignorant  of  the  mortgage,  but  I  am  asked  to 
find  fraud  in  law  when  I  know,  and  it  is  admitted,  there  was  none 
in  fact. 

The  second  point  in  this  case  is  no  less  interesting  than  the  first. 
Y^Y  tliP  rrif)j-j^rR^P^JJ2t^  stock  that_sha1]  be  put  into  the  sho^JjyJlhe 
mortgagor  is  included  in  the  conveyance^  It  is  undou^dly  the 
law  of  courts^oF""S(rrnity,'as  cases  presently  to  be  cited  will  show, 
that  after  acquired  chattels  definitely  pointed  out,  as,  for  instance, 
by  reference  to  the  ship,  mill,  or  place  into  which  they  are  to  be 
brought,  may  be  lawfully  assigned  as  security.  The  common  law 
recognizes  such  transfers  of  land  by  way  of  estoppel,  and  of  chat- 
tels when  they  are  the  produce  of  land  or  of  chattels  already  owned 
by  the  transferrer,  but  not  of  future  chattels  simpUciter,  unless 
there  be  some  novus  actus  interveniens  after  the  chattels  are  ac- 
quired ;  that  is  to  say,  either  some  new  transfer,  or  possession  taken 
under  the  old.  It  may  be  cause  of  regret  that  the  law  should 
be  different  in  the  courts  of  common  law  and  equity,  but  this 
is  of  no  importance  in  bankruptcy,  because  it  has  been  the  law 
for  a  great  while  that  an  assignee  in  bankruptcy  takes  only  the 
beneficial  interest  of  the  bankrupt;  and  the  courts  of  law  have 
admitted  equitable  defences,  such  as  equitable  liens,  &c.,  to  be  set 
up  in  such  cases,  years  before  they  had  power  by  statute  or  usage 
to  admit  equitable  pleas  in  ordinary  controversies;  and  it  was  every 
day's  practice  to  find  these  courts  passing  upon  equitable  titles  in 
behalf  of  a  defendant,  which  they  professed  to  know  nothing  about, 
and  certainly  could  not  deal  with,  if  relied  on  by  a  plaintiff.  Such 
was  and  is  the  law,  and  a  very  just  law,  as  far  as  it  goes. 

But  granting  the  rule  in  equity  to  be  that  after-acquired  chat- 


BRETT   V.    CARTER  53 

tels  may  be  mortgaged,  the  point  that  has  given  me  most  difficulty 
is  whether  such  is  the  law  of  Massachusetts.  I  suppose  that  tlie 
Federal  courts,  in  all  matters  of  title  to  property,  whether  real  or 
personal,  when  there  is  no  question  of  commercial  or  maritime  or 
general  law,  and  none  of  the  conflict  of  laws,  are  as  much  boiuid 
in  equity  as  at  common  law  by  the  jurisprudence  of  the  State  in 
which  they  sit.^  Or,  in  other  words,  I  understand  that  the  thirty- 
fourth  section  of  the  judiciary  act,  making  the  laws  of  the  State 
the  rule  in  actions  at  common  law,  is  declaratory  only,  and  that  on 
both  sides  of  this  Court  I  am  bound  to  follow  the  law  of  Mas- 
sachusetts in  the  local  questions,  and  the  general  law  in  general 
questions. 

Now,  the  only  decision  I  can  find  in  equity  in  this  State  upon 
this  subject  certainly  decides  very  distinctly  that  even  in  equity  a 
mortgage  of  after-acquired  chattels  is  invalid  (Moody  v.  Wright,  13 
Met.  17).  In  that  case  the  Court  refused  to  follow  the  then  re- 
cent decision  of  Story,  J.,  in  Mitchell  v.  Winslow,  2  Story,  630, 
and  relied  largely  on  the  dictum  of  a  very  distinguished  judge. 
Baron  Parke,  who  said,  in  Mogg  v.  Baker,  3  M.  &  W.  195,  that 
there  was  no  such  lien  in  equity.  Some  years  after  these  decisions 
Avere  rendered  the  House  of  Lords  unanimously  followed  the  doc- 
trine of  Judge  Story,  and  reversed  a  decision  of  Lord  Camp- 
bell, which  had  been  founded  on  the  dictum  already  referred  to, 
and  Baron  Parke  concurred  in  the  reversal  (Holroijd  v.  Marshall, 
10  H.  of  L.  191).  This  was  not  a  new  doctrine  in  courts  of  equity. 
(See  Curtis  v.  Auher,  1  Jac.  &  W.  532;  Re  Ship  Warre,  8  Price, 
269;  Langton  v.  Norton,  1  Hare,  549;  Douglas  v.  Russell,  4  Sim. 
524;  1  Myl.  &  K.  428;  Re  Howe,  1  Paige,  129.) 

Considering  the  decision  of  Judge  Story  in  this  circuit,  and  the 
reasons  given  by  the  Court  of  Massachusetts  for  not  following  it, 
and  the  entire  consistency  of  all  the  recent  decisions  with  Judge 
Story's  views,  and  the  disappearance  of  Baron  Parke's  dictum,  I 
am  not  prepared  to  say,  that  if  the  supreme  judicial  court  were 
now  asked  to  review  their  decision  in  Moody  v.  Wnght,  it  is  at  all 
certain  they  would  not  reverse  it,  and  under  the  circumstances  I 
do  not  feel  bound  to  hold  that  that  case  furnishes  a  settled  rule  of 
property  which  I  must  follow.  So  far  from  that,  I  believe  that  the 
law  of  Massachusetts  in  equity  is  that  a  mortgage  of  after-acquired 
chattels  is  valid. 

I  am  of  the  opinion  that  the  mortgage  of  1874  created  a  valid 
hen  in  behalf  of  the  defendant  upon  the  stock  of  goods  in  the  shop 
iSee  Thorley  v.  Pabst  Brewing  Co.,  179  Fed.  338  (1910). 


54  CONVEYANCE 

at  the  time  of  the  bankruptcy,  and  that  the  mortgage  of  1875  does 
not  vitiate  this  lien.  The  fixtures,  however,  which  were  not  men- 
1  tioned  in  the  first  mortgage,  cannot  be  held  by  the  second,  because 
that  was  given  after  the  bankrupt  had  become  insolvent,  to  the 
[knowledge  of  the  defendant.^ 

Decree  accordingly. 


KRIBBS  V.  ALFORD 
Court  of  Appeals  of  New  York,  1890 
(120  N.  Y.  519) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  the  fifth  judicial  department,  entered  upon  an  order  made 
the  first  Tuesday  of  June,  1887,  which  affirmed  a  judgment  in  a 
suit  for  foreclosure  in  favor  of  plaintiff  entered  upon  the  report  of  a 
referee.  The  nature  of  the  action  and  the  facts  are  sufficiently 
stated  in  the  opinion. 

Parker,  J.  On  the  15th  day  of  May,  1880,  one  Johnson,  then 
being  the  owner  in  fee  of  certain  lands,  executed  and  delivered  to 
Thomas  Argue  an  instrument  in  writing  (which  for  convenience 
will  hereafter  be  termed  a  lease),  which  conferred  upon  the  latter 
the  exclusive  right  to  produce  oil  and  gas  from  said  land  for  a 
period  of  twelve  years.  For  that  purpose  it  permitted  him  to  go 
upon  the  land  and  make  necessary  erections;  but  as  to  any  other 
use  Johnson  reserved  the  possession  and  right  of  enjoyment.  It 
gave  to  Argue  the  right  to  remove  any  and  all  tools,  boilers,  en- 
gines and  machinery;  also  the  casing  to  the  wells  and  drive-pipe, 
if  Johnson  should  refuse  to  pay  a  fair  price  therefor. 

Pursuant  to  the  terms  of  the  lease  Argue  and  his  assignees 
placed  upon  the  property  engines,  boilers  and  other  machinery 
necessary  to  carry  on  the  operations  for  which  the  lease  provided, 
and  in  view  of  the  intent  of  the  parties  as  manifested  by  the  terms 
of  the  lease  and  otherwise,  these  articles  retained  their  character 
of  personalty  after  annexation  {Potter  v.  Cromwell,  40  N.  Y.  287; 

'  Scharfenburg  v.  Bishop,  35  la.  60  been   dissipated.     Borden  v.   Croak, 

(1872),  accord.    This  is  the  prevaihng  131  111.  68  (1889). 
view.     The  contrary  opinion,  which  The  authorities  are  collected  in  an 

formerly  prevailed  in  Illinois  (Hunt  article  by  Samuel  Williston,  19  Harv. 

V.  Biillock,  23  111.  320  [I860];  Palmer  Law  Rev.  557-585  (1906). 
V.   Forbes,  id.   301)   seems   to   have 


I 


KRIBBS    v.    ALFORD  55 

Murdoch  v.  Gifford,  18  id.  28;  Hoyle  v.  P.  &  M.  R.  R.  Co.,  54  id. 
314,  324;  McRea  v.  C.  N.  Bank,  66  id.  489-495). 

In  October,  1880,  Argue  assigned  his  interest  in  the  lease  to  Al- 
bert Garrett  and  Adam  Prentice.  Thereafter  Adam  Prentice,  to 
secure  the  payment  of  $950.50,  executed  and  delivered  to  the  plain- 
tiff a  mortgage  on  his  undivided  interest  in  the  lease  and  upon  all 
"his  interest  in  the  oil  wells  now  thereon  and  to  be  by  him  placed 
thereon,  with  all  his  interest  in  the  structures,  fixtures,  equipments 
and  appurtenances  now  on  said  lease  or  hereafter  to  be  placed 
thereon."  On  the  10th  of  January,  1881,  a  copy  of  the  mortgage 
was  filed  in  the  Town  Clerk's  office,  and  thereafter  it  was  duly 
refiled.  Subsequently,  and  on  the  24th  day  of  August,  1882,  Gar- 
rett and  Prentice  sold  and  assigned  all  their  rights  and  interests 
under  the  lease  to  the  defendants  Alford  and  Curtis,  who  there- 
after finished  one  well,  put  down  two  others,  and  added  largely  to 
the  plant  by  way  of  engines,  boilers  and  other  machinery. 

And  the  substantial  question  presented  by  this  appeal  is,  whether 
the  tubings,  casings,  engines,  boilers,  shafting  and  other  machinery 
purchased  and  placed  upon  the  property  after  the  giving  of  the 
mortgage  are  embraced  within  it.  True,  the  appellant  contends 
that  his  title  to  the  chattels  is  not  burdened  with  the  plaintiff's 
mortgage,  because,  as  he  alleges,  Alford  and  Curtis  purchased  in 
good  faith  and  without  notice;  but  this  claim  is  not  well  founded, 
for  while  a  search,  which  failed  to  disclose  the  existence  of  a  mort- 
gage, was  timely  made  in  the  Town  Clerk's  office,  the  referee  has 
found  upon  sufficient  evidence  to  support  it,  that  the  mortgage 
was  filed  as  a  chattel  mortgage  in  the  proper  Town  Clerk's  office, 
and  within  thirty  days  of  the  expiration  of  the  year  thereafter  it 
was  refiled  with  the  statement  required  by  statute.  Alford  and 
Curtis  are,  therefore,  chargeable  with  constructive  notice,  and  the 
lien  of  the  plaintiff  is  not  affected  by  their  failure  to  find  the  mort- 
gage. 

In  some  jurisdictions  vaUdity  is  denied  to  a  contract  in  so  far  as 
it  purports  to  embrace  property  to  be  acquired  after  date.  The 
reason  assigned  for  this  holding  is  tersely  stated  in  Perkins  (sec. 
65):  "It  is  a  common  learning  in  the  law  that  a  man  cannot  grant 
or  charge  that  which  he  hath  not."  In  others  it  is  held  to  be  in- 
valid in  law  and  yet  operative  in  equity.  Unexplained,  this  seems 
to  be  a  solecism,  and  results  from  a  use  of  language  which  fails  to 
accurately  convey  the  idea  intended.  Invalidity  at  law  imports 
nothing  more  than  that  a  mortgage  of  property  thereafter  to  be 
acquired  is  ineffectual  as  a  grant  to  pass  the  legal  title.    A  court  of 


56  CONVEYANCE 

equity,  in  giving  effect  to  such  a  provision,  docs  not  put  itself  in 
conflict  with  that  principle.  It  does  not  hold  that  a  conveyance 
of  that  which  does  not  exist  operates  as  a  present  transfer  in  equity, 
any  more  than  it  does  in  law.  But  it  construes  the  instrument  as 
operating  by  way  of  present  contract  to  give  a  lien,  which,  as  be- 
tween the  parties,  takes  effect  and  attaches  to  the  subject  of  it  as 
soon  as  it  comes  into  the  ownership  of  the  party.  Such  we  deem 
the  rule  to  be  in  equity  in  this  State  (McCaffrey  v.  Woodin,  65 
N.  Y.  459;  Wisfier  v.  Ocumpaugh,  71  id.  113;  Coats  v.  Donnell, 
94  id.  168-177). 

As  between  the  mortgagor,  or  his  assignee,  and  the  mortgagee, 
therefore,  the  chattej  mortgage  operated  to  create  a  lien  in  equity 
as  to  the  chattels  purchased  and  placed  upon  the  property  by  the 
mortgagor  subsequent  to  its  date.  This  lien  the  trial  court  rightly 
enforced  by  its  judgment.  But  it  went  further  and  declared,  in 
effect,  that  the  lien  attached  to  the  personalty  placed  upon  the 
property  by  the  assignees  of  the  mortgagor  as  well.  This,  we  think, 
was  error.  The  assignees  did  not  contract  that  the  machinery  to 
l)e  placed  upon  the  property  by  them  should  be  subject  to  the  pro- 
visions of  the  mortgage.  They  did  not  assume  or  agree  to  pay  the 
mortgage  or  carry  out  its  provisions.  Indeed,  the  assignment  con- 
tained no  condition  or  covenant  whatsoever,  and  the  assignees  did 
not  even  know  of  the  existence  of  the  mortgage.  Their  acceptance 
of  the  lease  bound  them  to  fulfill  the  covenants  running  with 
the  land  (113  Penn.  St.  83;  Spencer's  Case,  1  Smith's  L.  C.  145). 
But  it  did  not,  in  addition,  burden  them  with  the  obligation  to 
make  good  the  personal  covenants  given  by  the  lessee  to  third  par- 
ties as  security  for  an  indebtedness,  because  they  had  constructive 
notice  of  the  existence  of  the  mortgage  the  lien  of  plaintiff  can 
be  enforced,  and  the  defendants  deprived  of  the  machinery  on  the 
premises  at  the  time  of  the  purchase  by  them  of  the  lease.  But  the 
lien  provided  for  by  the  instrument  could  in  any  event  only  extend 
to  property  thereafter  acquired  by  the  mortgagor.  It  coulcl  not 
attach  to  chattels  to  which  the  mortgagor  has  not  acquired  either 
title  or  possession.  Indeed,  it  does  not,  by  its  terms,  purport  to 
embrace  any  other  after-acquired  property  than  that  placed 
thereon  by  the  mortgagor. 

It  follows,  from  the  views  expressed,  that  the  judgment  should 
be  reversed  and  a  new  trial  granted,  with  costs  of  this  court  to  the 
appellant,  unless,  within  thirty  days,  the  plaintiff  stipulate  to 
modify  the  judgment  by  excepting  therefrom  the  articles  placed 
on  the  property  after  the  assignment  to  Alford  and  Curtis,  and 


ROCHESTER    DISTILLING    CO.    V.    RASEY  57 

described  in  Schedule  D.,  in  which  event  the  judfi;nient  as  mocUfied 
is  affirmed,  with  costs  to  the  appellant. 

All  concur  except  Bradley  and  Haight,  J  J.,  not  sitting. 

Judgment  accordingly. 


ROCHESTER  DISTILLING  CO.   v.   RASEY 

Court  of  Appeals  of  New  York,  1894 

(142  A^.  Y.  570) 

Appeal  from  order  of  the  General  Term  of  the  Supreme  Court 
in  the  fifth  judicial  department,  made  October  4,  1892,  which  re- 
versed a  judgment  in  favor  of  defendant,  entered  upon  a  verdict 
directed  by  the  court,  and  granted  a  new  trial. 

In  February,  1890,  the  plaintiff  recovered  a  judgment  against 
one  Lovell  for  $147.44.  In  April,  1890,  Lovell,  being  the  lessee 
of  certain  farm  lands,  in  order  to  secure  one  Page  as  an  accommo- 
dation indorser  and  for  the  repaj^ment  of  money  borrowed  from 
him,  executed  and  delivered  to  him  a  chattel  mortgage;  which 
covered  "the  grass  now  growing  upon  the  premises  leased,  etc.; 
also  all  the  corn,  potatoes,  oats,  and  beans,  which  are  now  sown  or 
planted,  or  which  are  hereafter  sown  or  planted  during  the  next 
3'ear,  etc."  At  the  time,  but  a  small  part  of  the  land  had  been 
planted  with  potatoes,  and  the  greater  part  of  the  planting  of  pota- 
toes, and  all  that  of  the  beans,  was  done  in  the  following  month. 
On  July  5th  an  execution  was  issued  upon  plaintiff's  judgment, 
and  the  sheriff  levied  upon  the  growing  crops  and  advertised  their 
sale  in  August;  at  which  sale  plaintiff  purchased  them.  After  the 
levy  by  the  sheriff.  Page,  the  chattel  mortgagee,  on  July  15th  fore- 
closed under  his  mortgage,  gave  notice  and  sold  the  growing  crops 
to  the  defendant.  Defendant  took  possession  of  the  property  so 
purchased  and  this  action  was  brought  to  recover  its  possession. 
The  trial  judge,  being  moved  by  each  of  the  parties  for  a  verdict 
in  his  favor,  directed  it  for  the  plaintiff  as  to  the  beans  and  for  the 
defendant  as  to  the  potatoes  and  ordered  the  exception  taken  to 
that  direction  to  be  heard,  in  the  first  instance,  at  the  General 
Term.  That  court  sustained  the  plaintiff's  exception  to  the  ruling 
of  the  trial  judge  and  ordered  a  new  trial;  but  allowed  an  appeal 
to  this  court,  on  the  ground  that  a  question  of  law  was  involved 
which  ought  to  be  reviewed. 


58  CONVEYANCE 

Gray,  J.  I  think  this  case  does  not,  in  principle,  differ  from  any 
other  case,  where  a  chattel  mortgage  has  been  given  upon  property 
in  expectancy  and  which  has  no  potential  existence  at  the  time 
of  its  execution.  The  fact  that  the  subject  of  the  mortgage  is  a 
crop  to  be  planted  and  raised  in  the  future  upon  land  does  not 
affect  the  determination  of  this  question  upon  established  princi- 
ples. It  may  be  that  precisely  such  a  case,  in  its  facts,  has  not 
been  passed  upon  in  this  court;  but  there  are  expressions  of  opin- 
ion, in  several  cases  of  a  kindred  nature,  in  the  reports  of  this  court 
and  of  other  courts  in  this  State,  which  leave  us  in  no  doubt  as 
to  the  doctrine  which  should  govern.  The  proposition  that  a  mort- 
gage upon  chattels  having  no  actual,  nor  potential,  existence,  can 
operate  to  charge  them  with  a  lien,  when  they  come  into  existence, 
as  against  an  attaching,  or  an  execution  creditor,  has  frequently 
been  discountenanced  and  repudiated.  Grantham  v.  Hawley,  Ho- 
bart,  133,  is  the  general  source  of  authority  for  the  proposition  that 
one  may  grant  what  he  has  only  potentially,  and  there  is  no  good 
reason  for  doubting  that  that  which  has  a  potential,  or  possible 
existence,  like  the  spontaneous  product  of  the  earth,  or  the  in- 
crease of  that  which  is  in  existence,  may  properly  be  the  subject  of 
sale,  or  of  mortgage.  The  right  to  it,  when  it  comes  into  exist- 
ence, is  regarded  as  a  present  vested  right.  That  which  is,  how- 
ever, the  annual  product  of  labor  and  of  the  cultivation  of  the 
earth  cannot  be  said  to  have  either  an  actual,  or  a  potential  exist- 
ence before  a  planting. 

This  action  being  one  at  law,  the  inquiry  is  limited  to  ascertain- 
ing the  strictly  legal  rights  of  two  contending  creditors  to  the  prop- 
erty of  their  debtor,  Powell,  in  the  crops  which  he  had  raised.  It  is 
unlike  some  of  the  cases,  which  have  arisen  between  the  lessor  of 
land  and  his  lessee.  In  such  a  case,  a  different  principle  might 
operate  to  create  and  support  the  hen  of  the  landlord  upon  the 
crops,  as  they  come  into  existence  upon  the  land.  The  title  to  the 
land  being  in  him,  an  agreement  between  him  and  the  lessee  for  a 
lien  upon  the  crops  to  be  raised,  to  secure  the  payment  of  the  rent, 
would  operate  and  be  given  legal  effect,  as  a  reservation,  at  the 
time,  of  the  title  to  the  product  of  the  land.  That  was  the  case  of 
Andreiv  v.  Newcomb,  32  N.  Y.  417,  where  the  owner  of  land  agreed 
with  another  that  he  might  cultivate  it  at  a  certain  rent;  the  crop 
to  remain  the  property  of  the  landlord,  until  the  tenant  should 
give  him  security  for  the  rent.  Judge  Denio  repudiated  the  idea 
that  the  arrangement  could  be  called  a  conditional  sale  of  the  flax; 
because  the  subject  was  not  in  existence.    He  held  that  the  idea 


ROCHESTER    DISTILLING    CO.    V.    RASEY  59 

of  a  pledge  or  of  a  sale  had  no  application  and  that  the  effect  of  the 
contract  was  to  give  to  the  landlord  the  original  title  to  the  crop. 
His  remarks  upon  the  subsequent  vesting  of  the  title  to  crops, 
when  they  come  into  being,  have  reference  to  such  an  arrange- 
ment between  landlord  and  tenant  and  not  to  the  case  of  a 
mortgage,  or  conditional  sale  to  some  third  person  of  crops  yet  to 
be  planted.  Mr.  Thomas,  in  his  work  on  Chattel  Mortgages,  upon 
the  subject  of  mortgaging  a  crop  not  yet  planted,  says  (§  149) 
"the  weight  of  authority  inchnes  to  the  view  that  the  hen  is  an 
equitable  one  and  differs,  in  some  respects,  from  the  charge  created 
by  a  mortgage  of  property  in  existence  at  the  date  of  the  agree- 
ment;" and,  again,  he  says  "the  authorities  are  mainh'-  to  the 
effect  that  such  a  mortgage  conveys  no  title  or  interest  as  against 
attaching,  or  judgment  creditors  of  the  mortgagor."  About  this 
question  of  mortgaging  personal  property,  to  be  subsequently  ac- 
quired, much  has  been  written  in  the  books,  which  I  deem  unneces- 
sary to  resume  here  at  any  great  length.  It  results  from  a  review 
of  the  authorities  that  a  mortgage  cannot  be  given  future  effect  as 
a  lien  upon  personal  property,  which,  at  the  time  of  its  deliver}', 
was  not  in  existence,  actually  or  potentially,  when  the  rights  of 
creditors  have  intervened.  At  law  such  a  mortgage  must»be  con- 
ceded to  be  void.  The  mortgage  could  have  no  positive  operation 
to  transfer  in  proBscnti  property  not  in  esse.  At  furthest,  it  might 
operate  by  way  of  a  present  contract  between  the  parties  that  the 
creditor  should  have  a  lien  upon  the  property  to  be  subsequently 
acquired  by  his  debtor,  which  equity  would  enforce  as  against  the 
latter. 

In  Bank  of  Lansinghurgh  v.  Crary,  1  Barb.  542,  Paige,  J.,  ob- 
served: "I  strongly  incline  to  the  opinion  that  a  chattel  mortgage 
can  only  operate  on  property  in  actual  existence  at  the  time  of  its 
execution;  that  it  cannot  be  given  on  the  future  products  of  real 
estate;  and  that  if  given  one  day,  or  one  week,  before  the  product 
of  the  land  comes  into  existence,  it  is  as  inoperative  as  if  the  chattel 
mortgage  had  been  given  on  a  crop  of  grass  or  grain,  one,  two,  or 
three  years  previous  to  its  production." 

In  a  subsequent  case,  the  same  learned  judge  considered  the 
nature  of  a  mortgage  relating  to  property  not  then  in  existence 
and  its  effect  as  to  creditors  of  the  mortgagor.  In  Otis  v.  Sill,  8 
Barb.  102,  the  plaintiff  claimed  under  a  chattel  mortgage,  which, 
after  describing  the  property  mortgaged,  contained  the  following 
clause:  "All  scythes  manufactured  out  of  the  said  iron  and  steel 
and  all  scythes,  iron,  steel  and  coal  which  may  be  purchased  in  lieu 


60  CONVEYANCE 

of  the  property  aforesaid."  Subsequently,  the  property  was  taken 
undei-  executions  issued  on  judgments  and  the  action  was  brought 
for  its  taking  and  detention.  Paige,  J.,  refers  to  his  opinion  in 
Bank  of  Lansingburgh  v.  Crary,  that  a  chattel  mortgage  could  only 
operate  on  property  in  actual  existence  at  the  time  of  its  execution. 
He  elaborately  discusses  the  question  of  whether  such  a  mortgage 
was  a  Hen  upon  the  property  when  acquired,  as  against  the  cred- 
itors of  the  mortgagor,  and  reviews  very  many  authorities  in  Eng- 
land and  some  in  this  country.  His  conclusions  were  adverse  to 
the  proposition.  He  held  that,  as  to  subsequently  acquired  prop- 
erty, the  mortgage  could  only  be  regarded  as  a  mere  contract  to 
give  a  further  mortgage  upon  such  property  and  that  no  specific 
lien  was  created  thereby.  He  says,  "  I  have  come  to  the  conclusion, 
as  the  result  of  all  the  authorities,  that  if  the  mortgage  in  this  case 
did  amount  to  a  contract  to  execute  a  further  mortgage  on  subse- 
quently acquired  property,  it  was  good  as  an  executory  contract 
only  and  did  not  constitute  a  lien  on  the  articles  of  the  kind  men- 
tioned therein  when  subsequently  purchased."  In  Gardner  v. 
McEwen,  19  N.  Y.  123,  the  chattel  mortgage  to  the  plaintiff,  upon 
property  in  the  store,  "or  which  might  thereafter  be  purchased  and 
put  into  store,"  was  held  inoperative  to  convey  the  title  to  the  after- 
acquired  property,  as  against  the  defendant,  who  purchased  it  at  a 
sale  under  execution  upon  a  judgment  against  the  mortgagor. 
McCaffrey  v.  Woodin,  65  N.  Y.  459,  was  an  action  in  trover. 
Plaintiff  was  lessee  and  defendant  was  agent  for  the  lessor.  The 
former  covenanted  in  the  lease  that  the  latter  should  have  "a  lien 
as  security  for  the  payment  of  the  rent"  on  all  the  personal  prop- 
erty, etc.,  which  should  be  put  upon  the  premises,  "and  such  lien 
to  })e  enforced,  on  the  non-payment  of  the  rent,  by  the  taking  and 
the  sale  of  such  property  in  the  same  manner  as  in  cases  of  chattel 
mortgages  on  default  thereof."  By  virtue  of  this  provision  in  the 
lease,  the  defendant  took  the  farm  produce.  The  decision  upheld 
the  right  of  the  landlord  to  do  so;  holding  that  as  the  crops  came  into 
existence  they  vested  in  the  landlord.  It  is  to  be  noted  that  the 
court  considered  the  case  as  one  to  be  governed  by  equitable  prin- 
ciples, observing  that  "the  matter  comes  up  solely  between  the 
parties,  there  being  no  intervening  rights  of  creditors."  Referring 
to  Gardner  v.  McEioen  (supra),  it  was  remarked  that  that  "is  a 
case  between  the  mortgagee  and  creditors  and  was  affected  by  our 
act  concerning  filing  chattel  mortgages."  Treating  the  question 
as  one  for  the  application  of  equitable  principles,  it  was  held  that 
the  lessor  was  entitled  to  set  up  her  equitable  rights,  as  a  defense 


ROCHESTER   DISTILLING    CO.    V.    RASEY  61 

to  the  plaintiffs'  (the  lessee's)  action  of  trover.  In  the  same  case, 
Gray,  C,  observed  that,  if  the  relation  of  mortgagor  and  mort- 
gagee had  been  created  between  the  parties,  "it  was  inoperative 
upon  any  property  which  at  the  time  of  its  execution  was  not 
actually,  or  potentially,  either  possessed  or  owned  by  McCaffrey." 
In  Cressey  v.  Sabre,  17  Hun,  120,  where  the  opinion  was  delivered 
by  Boardman,  J.,  and  was  concurred  in  by  Justices  Learned  and 
Bockes,  a  chattel  mortgage  upon  potatoes  (among  other  articles  of 
property),  which  were  not  yet  planted,  was  held  inoperative.  The 
distinction  was  there  mentioned  between  a  case  like  McCaffrey  v. 
Woodin,  where  the  question  of  title  was  between  the  parties  to  the 
contract  and  one  where  it  arose  between  the  mortgagee  and  a  third 
person.  In  Coats  v.  Donnell,  94  N.  Y.  168,  Andrews,  J.,  observed 
that  "a  contract  for  a  lien  on  property  not  in  esse  may  be  effectual 
in  equity  to  give  a  lien  as  between  the  parties,  when  the  property 
comes  into  existence  and  where  there  are  no  intervening  rights  of 
creditors  or  third  persons."  Krihhs  v.  Alford,  120  N.  Y.  519,  recog- 
nizes the  invalidity  at  law  of  a  chattel  mortgage  of  property  there- 
after to  be  acquired,  but  holds  that  as  between  the  parties  their 
contract  would  be  construed  in  equity  as  creating  an  equitable 
lien,  which  could  be  enforced. 

The  idea  of  a  chattel  mortgage  is  that  of  a  conversance  of  per- 
sonal property  to  secure  the  debt  of  the  mortgagor;  which,  being 
conditional  at  the  time,  becomes  absolute  if,  at  a  fixed  time,  the 
property  is  not  redeemed,  and  the  statute  makes  it  valid,  as  against 
creditors  of  the  mortgagor,  only  when  filed  as  directed.  The  stat- 
ute provides  for  the  filing  as  a  substitute  for  "an  immediate  de- 
livery," or  "an  actual  and  continued  change  of  possession  of  the 
things  mortgaged."  Such  provisions  seem  to  me  to  exclude  the 
idea  of  a  chattel  mortgage  upon  non-existent  things;  or  that  such 
an  instrument  could  operate  to  defeat  the  lien  of  an  attaching,  or 
an  execution  creditor  upon  subsequently^  acquired  property.  Re- 
garding the  chattel  mortgage  in  question  as  a  mere  executory 
agreement  to  give  a  lien  when  the  property  came  into  existence, 
some  further  act  was  necessary  in  order  to  make  it  an  actual  and 
effectual  lien  as  against  creditors.  But  there  was  no  further  act  l)y 
the  parties  to  the  instrument  to  create  such  an  actual  lien  and  the 
levy  of  the  execution  upon  the  crops  operated  to  transfer  their 
possession  from  the  owner  to  that  of  the  sheriff.  As  against  his 
possession  the  equities  of  the  mortgagee  are  unavailing  for  any 
purpose.  Between  the  two  creditors  it  is  a  question  of  who  had 
gained  the  legal  right  to  have  the  crops  in  satisfaction  of  his  claim 


62  CONVEYANCE 

and  the  equitable  right  of  the  mortgagee  to  them,  as  against  his 
debtor,  was  defeated  by  the  seizure  at  the  instance  of  the  judgment 
creditor.  We  are  satisfied  as  to  the  correctness  of  the  conclusion 
reached  by  the  General  Term  below,  that  there  should  have  been 
a  direction  of  a  verdict  for  the  plaintiff  for  the  potatoes  and  beans, 
obtained  from  the  planting  done  after  the  execution  and  dehvery 
of  the  mortgage. 

The  order  appealed  from  should  be  affirmed  and,  under  the 
stipulation,  judgment  absolute  should  be  ordered  for  the  plaintiff, 
with  costs  in  all  the  courts.^ 

All  concur,  except  Earl,  J.,  not  voting. 

Ordered  accordingly. 


ZARTMAN  V.   FIRST  NATIONAL  BANK 

Court  of  Appeals  of  New  York,  1907 

(189  A^  Y.  267) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  fourth  judicial  department,  entered  Novem- 
ber 27,  1905,  affirming  a  judgment  in  favor  of  plaintiff  entered 
upon  a  decision  of  the  court  on  trial  at  an  Equity  Term. 

The  object  of  this  action  was  to  determine  the  rights  of  the  par- 
ties to  a  fund  realized  from  a  sale  in  bankruptcy  of  the  property  of 
the  Waterloo  Organ  Company,  a  manufacturing  corporation  form- 
erly carrying  on  the  business  of  making  and  selling  organs,  pianos 
and  other  musical  instruments  in  the  village  of  W^aterloo.  All  the 
property  of  the  company,  both  real  and  personal,  was  sold  in  one 
parcel,  free  from  liens,  by  order  of  the  United  States  District  Court, 
and  the  value  of  such  chattels  included  therein  as  were  acquired 
by  the  company  after  it  had  given  a  corporate  mortgage  to  secure 
its  bonds  issued  and  negotiated  in  the  usual  way,  was  the  sum  of 
Slo,480.  The  judgment  directed  in  favor  of  the  plaintiff  consisted 
mainly  of  that  sum  and  there  is  no  controversy  over  any  other  item. 
Upon  appeal  to  the  Appellate  Division  the  judgment  was  affirmed, 
one  of  the  justices  dissenting,  and  the  defendant  appealed  to  this 
court. 

i5w«v.i5;He«,  19  Wall.  544  (1873);  a  mortgage  of   a   crop  made  after 

Wheeler  v.  Becker,  68  Iowa,  723  (1886) ,  planting. 

contra.     But  see  Comstock  v.  Scales,  Chick  v.  Nute,  176  Mass.  57  (1900), 

7  Wis.  159  (1858),  denying  effect  to  per  Holmes,  C.  J.,  accord. 


I 


ZARTMAN    V.    FIRST   NATIONAL   BANK  63 

Vann,  J.  The  question  presented  by  this  appeal  is  whether,  in 
a  mortgage  given  by  a  manufacturing  corporation  upon  all  its 
property,  real  and  personal,  to  secure  its  negotiable  bonds  with  the 
right  of  possession  and  enjoyment  in  the  mortgagor  for  its  own  use 
and  benefit  until  default,  a  clause,  purporting  in  terms  to  cover 
after-acquired  personal  property,  is  good  as  to  shifting  stock  and 
material  on  hand  when  possession  was  taken  by  the  mortgagee 
pursuant  to  the  provisions  of  the  mortgage,  one  day  after  default 
in  the  pajment  of  interest  and  three  days  before  the  commence- 
ment of  bankruptcy  proceedings  against  the  mortgagor,  as  to  the 
trustee  in  bankruptcy  subsequently  appointed  therein? 

To  the  extent  that  the  mortgage  covered  personal  property  it 
was  a  chattel  mortgage,  but  as  it  was  executed  by  a  corporation  to 
secure  the  paj^ment  of  its  bonds  and  was  duly  recorded  as  a  mort- 
gage of  real  property,  according  to  the  provisions  of  the  Lien  Law, 
there  w^as  no  necessity  for  filing  or  refiling  it  as  a  chattel  mortgage. 
(L.  1897,  ch.  418,  §  91).  No  question  is  raised  as  to  the  hen  of  the 
mortgage  upon  machinery,  tools  and  appliances  belonging  to  the 
manufacturing  plant,  for  the  controversy  is  confined  to  musical 
instruments  on  hand,  finished  and  unfinished,  and  materials  from 
which  other  instruments  might  be  made. 

The  learned  counsel  for  the  appellant,  in  an  able  argument,  con- 
tended that  while  the  mortgage  did  not  create  an  absolute  hen  upon 
stock  and  materials  acquired  after  its  date,  it  operated  as  an  exec- 
utory contract  to  deliver  possession  upon  default  and  to  place  the 
property  as  it  then  existed  under  the  lien  of  the  mortgage.  He 
conceded  that  property  of  this  nature  is  subject  to  seizure  on  exe- 
cution by  unsecured  creditors  during  the  period  while  it  is  subject 
to  the  disposal  of  the  mortgagor  and  until  the  trustee  pursuant  to 
the  mortgage  takes  possession  of  it,  but  insisted  that  the  act  of 
taking  possession  ripens  the  lien  of  the  mortgage  and  makes  it 
absolute  as  against  general  creditors  or  those  with  no  prior  lien. 

The  mortgage  provided  that  "until  default  shall  be  made  in  the 
payment  of  the  interest  or  principal  of  the  said  bonds  or  some  of 
them  ...  it  shall  be  lawful  for  the  said  partj^  of  the  first  part  and 
its  successors  peaceably  and  quietly  to  have,  hold,  use,  possess  and 
enjoy  the  said  premises  and  propert}^  with  the  appurtenances,  and 
to  receive  the  income  and  profits  thereof  to  its  own  use  and  benefit 
without  hindrance  or  interruption"  from  the  mortgagee  or  its 
successors.  This  clause  gave  the  mortgagor  power  to  sell  for  its 
own  benefit  all  materials  and  products  until  the  trustee  took 
possession  after  default  in  the  payment  of  interest.    No  limitation 


64  CONVEYANCE 

is  placed  by  the  mortgage  upon  the  use  to  be  made  of  the  proceeds 
derived  from  the  sale  of  the  stock  and  materials.  As  was  said  by 
the  leayned  justice  who  wrote  for  the  Appellate  Division:  "The 
mortgagor  was  given  unrestricted  dominion  over  this  mortgaged 
property  or  whatever  was  subsequently  acquired.  It  might  sell 
or  dispose  of  all  the  personal  property.  It  was  permitted  to  use  the 
income  or  profits  of  the  business.  It  was  not  required  to  expend 
these  avails  in  keeping  the  stock  good,  nor  for  the  development 
of  the  business  or  in  its  management  in  any  way,"  but  could  use 
them  for  its  own  benefit  "precisely  the  same  as  if  no  lien  existed." 
Conceding  that  the  right  of  the  mortgagor  to  receive  the  profits 
to  its  own  use  means  a  proper  and  legitimate  corporate  use,  still 
the  use  permitted  was  independent  of  the  mortgage  or  any  hen 
supposed  to  be  created  thereby. 

As  was  said  in  a  case  upon  which  both  parties  rely:  "The  right 
of  the  mortgagor  in  the  meantime,"  that  is,  until  default,  "to  the 
use  of  the  earnings,  amounts,  practically,  to  absolute  ownership, 
and  hence  the  mortgage  cannot  operate  as  a  lien  upon  such  earn- 
ings to  the  prejudice  of  the  general  creditors  until  actual  entry 
and  possession  taken,  and  then  only  upon  what  is  earned  after  that 
time.  The  lien  of  the  mortgage  upon  future  earnings  is  consum- 
mated as  against  other  creditors  only  by  the  fact  of  the  possession 
of  the  property,  and  cannot  have  any  retroactive  operation,  since 
it  would  then  deprive  the  unsecured  creditor  of  the  fund,  upon  the 
faith  of  which  he  may  have  given  credit  to  the  mortgagor  during 
the  time  when  the  latter  was  permitted  to  deal  with  and  use  it  as  its 
own.  The  lien  upon  the  earnings,  in  favor  of  the  bondholders,  at- 
taches only  upon  what  is  earned  after  the  time  when  the  hen  is 
perfected  by  entry  and  possession."  {N.  Y.  Security  &  Trust  Co. 
V.  Saratoga  Gas  &  EL  L.  Co.,  159  N.  Y.  137,  143.) 

If  a  lien  was  created  by  the  mortgage  upon  property  not  in 
existence  at  its  date,  possession  after  it  came  into  existence  was  of 
no  importance.  If  no  lien  was  created  by  the  mortgage  upon  such 
property,  the  taking  of  possession  pursuant  to  its  terms  did  not 
create  one  as  against  general  creditors,  who  are  presumed  to  have 
dealt  with  the  mortgagor  in  reliance  upon  its  absolute  ownership 
of  the  stock  on  hand.  While  the  record  of  the  mortgage  was  notice 
to  all,  it  was  notice  of  all  its  terms,  which  included  the  right  of 
disposition  for  the  use  and  benefit  of  the  mortgagor,  with  no  duty 
to  apply  the  avails  upon  the  mortgage  indebtedness.  If  the  ques- 
tion had  arisen  between  the  parties  to  the  mortgage,  equity  might 
recognize  a  contract  to  give  a  hen  and  treat  it  as  an  actual  lien,  but 


ZARTMAN    V.    FIRST   NATIONAL   BANK  65 

it  arises  between  tlie  mortgagee  and  the  general,  unsecured  cretl- 
itors,  who  had  Uttle,  if  anything,  to  rely  upon  except  the  shifting 
stock,  which,  directly  or  indirectly,  they  themselves  had  furnished. 
The  credit  extended  by  them  enabled  the  mortgagor  to  carry  on 
business,  and  if  the  product  of  that  credit  goes  to  the  mortgagee, 
not  only  are  they  helpless,  but,  if  the  law  is  so  declared,  hereafter 
manufacturing  corporations  needing  credit  will  he  helpless  also. 
If  it  is  understood  that  a  corporate  mortgage  given  by  a  manufact- 
uring corporation  may  take  everything  except  accounts  and  debts, 
such  corporations,  with  a  mortgage  outstanding,  will  have  to  do 
business  on  a  cash  basis  or  cease  to  do  business  altogether.  As- 
suming that  a  court  of  equity  may  uphold  and  give  effect  to  such  a 
mortgage  when  the  rights  of  the  mortgagor  and  mortgagee  only 
are  involved,  it  will  not  aid  the  mortgagee  at  the  expense  of  sub- 
sequent creditors  when  their  rights  are  involved.  It  will  not  treat 
a  contract  to  give  a  mortgage  upon  a  subject  to  come  into  existence 
in  the  future  as  a  mortgage  actually  then  given,  if  the  result  would 
deprive  the  general  creditors  with  superior  equities  so  far  as  after- 
acquired  property  is  concerned,  of  their  only  chance  to  collect 
del)ts.  It  is  only  when  the  rights  of  third  parties  will  not  be  prej- 
udiced that  equity,  treating  as  done  that  which  was  agreed  to  be 
done,  will  turn  a  contract  to  give  a  mortgage  on  property  to  be 
acquired  into  an  equitable  mortgage  on  such  property  as  fast  as 
it  is  acquired  and  enforce  the  same  accordingly  against  the  mort- 
gagor, his  representatives  and  assigns.  In  other  words,  the  agree- 
ment and  intention  of  the  parties  to  a  mortgage  upon  property 
not  yet  in  existence  will  be  given  effect  by  a  court  of  equity  so  far 
as  practicable,  provided  no  interest  is  affected  except  that  of  the 
mortgagor  and  mortgagee,  who  entered  into  the  stipulation,  but 
equity  closes  its  doors  and  refuses  relief  if  the  interests  of  creditors 
are  involved.  The  result  thus  announced  is  founded  on  principle 
and  sanctioned  by  authority,  (Kinbbs  v.  Alford,  120  N.  Y.  519, 
524;  Wisner  v.  Ocumpaugh,  71  N.  Y.  113;  McCaffrey  v.  Woodin, 
65  N.  Y.  459;  Jones  on  Chattel  Mortgages  [4th  ed.],  170;  BeaU  v. 
White,  94  U.  S.  382,  386.) 

Was  the  alleged  lien  good  at  law?  The  authorities  cited  by  both 
parties  show  that  it  was  not  for  two  reasons:  First,  because  a  man 
cannot  grant  what  he  does  not  own,  actually  or  potentially.  Qui 
non  habet,  ille  non  dat.  {Rochester  Distilling  Co.  v.  Rasey,  142  N.  Y. 
570;  Deeley  v.  Dunght,  132  N.  Y.  59;  N.  Y.  Security  &  Trust  Co. 
V.  Saratoga  Gas  &  El.  L.  Co.,  159  N.  Y.  137;  Gardner  v.  McEwen, 
19  N.  Y.  123;  Andrews  v.  Durant,  11  N.  Y.  35;  Farmers'  Loan  & 


(j6  CONVEYANCE 

Trust  Co.  V.  Long  Beach  Imp.  Co.,  27  Hun,  89;  Jones  on  Chattel 
Mortgages  [4th  ed.],  §  138;  Thomas  on  Chattel  Mortgages,  §  137; 
Thompson  on  Corporations,  §  6141;  6  Cyc.  1041.) 

Second,  because  an  agreement  permitting  the  mortgagor  to  sell 
for  his  own  benefit  renders  the  mortgage  fraudulent  as  matter  of 
law  as  to  the  creditors  represented  by  the  plaintiff.  (Skilton  v. 
Codington,  185  N.  Y.  80,  90;  Mandeville  v.  Avery,  124  N.  Y.  376; 
Hangen  v.  Hachemeister,  114  N.  Y.  566;  Potts  v.  Hart,  99  N.  Y. 
168;  Southard  v.  Benner,  72  N.  Y.  424.) 

In  reading  the  authorities  it  is  important  to  observe  how,  where 
and  between  whom  the  question  arose,  for  the  remarks  of  learned 
judges  in  discussing  the  rights  of  the  mortgagor  and  mortgagee 
are  not  in  point  when  the  question  relates  to  the  rights  of  third 
persons  as  against  either  or  both  of  the  parties  to  the  mortgage. 
Nor  are  they  in  point  when,  as  in  Thompson  v.  Fairbanks  (196  U.  S. 
516,  522)  the  Federal  courts  feel  bound  to  follow  the  decisions  of 
the  state  courts  as  to  local  questions  and  the  law  of  the  state 
where  the  case  arose  differs  from  that  of  the  state  of  New  York. 
(Dooleij  V.  Pease,  180  U.  S.  126.) 

As  we  have  seen,  equity  takes  hold  of  the  subject  with  a  strong 
hand  in  order  to  enable  the  mortgagee  to  get  what  the  mortgagor 
intended  to  give,  provided  no  other  interest  is  involved,  but  when 
the  creditors  of  the  mortgagor  enter  the  field  equity  goes  no  farther 
than  the  law  and  will  simply  enforce  a  lien  if  it  exists  without  at- 
tempting to  perfect  it  if  something  is  lacking  to  make  it  complete. 
The  taking  of  possession  by  the  mortgagee  is  relied  upon  by  the 
appellant  to  ''ripen  the  lien,"  which,  as  is  conceded,  was  inchoate 
before.  If  the  contract  between  the  mortgagor  and  mortgagee 
fell  short  of  creating  a  lien,  as  was  clearly  the  case,  the  act  of  tak- 
ing possession  did  not  enlarge,  perfect  or  complete  it.  A  mort- 
gagee cannot  add  to  his  title  by  his  own  act.  (Stephens  v.  Perrine, 
143  N.  Y.  476.)  The  defendant  did  not  have  title  to  the  after- 
acquired  property  when  it  took  possession.  All  it  had,  as  the 
courts  hold,  was  the  promise  of  the  mortgagor  to  give  title  as  the 
property  came  into  existence.  The  mortgagor  did  not  keep  its 
promise  by  giving  supplementary  mortgages  as  pianos  were  made 
or  materials  were  purchased,  or  in  any  other  way.  If  it  had,  credit- 
ors would  have  been  warned  and  could  have  avoided  the  danger. 
Time  passed  and  insolvency  overwhelmed  the  mortgagor,  when  it 
was  too  late  to  give  additional  mortgages  owing  to  the  Bankruptcy 
Act.  The  plaintiff,  as  trustee  in  bankruptcy  of  the  mortgagor,  has 
the  same  rights  as  creditors  armed  with  an  attachment  or  execu- 


TITUSVILLE    IRON    CO.    V.    CITY    OF   NEW   YORK  67 

tion.  (Skilton  v.  Codington,  supra;  In  re  Werner,  5  Dill.  119;  In  re 
Garcewich,  8  Am.  Bank  Rep.  149;  U.  S.  Bankruptcy  Act  of  1898, 
§  70.)  When  the  general  creditors  intervened  through  the  plain- 
tiff, the  mortgagee  was  simply  in  possession  with  title  to  the  prop- 
erty that  was  in  existence  when  the  mortgage  was  given,  but  with 
no  title  to  the  shifting  stock  subsequently  acquired.  As  to  that 
property,  it  had  only  the  promise  of  the  mortgagor,  which  equity 
could  help  out  by  treating  as  done  what  was  agreed  to  be  done,  but 
which  it  will  not  help  out  to  the  injury  of  unsecured  creditors. 
The  rights  of  the  defendant,  incomplete  when  it  took  possession, 
are  incomplete  still,  for  they  can  be  perfected  only  by  the  aid  of 
equity,  and  equity  refuses  to  help  under  the  circumstances  of  this 
case. 

The  judgment  awarding  the  proceeds  of  the  after-acquired  prop- 
erty to  the  plaintiff  was,  therefore,  properly  rendered,  and  the 
action  of  the  courts  below  should  be, sustained. 

The  judgment  appealed  from  should  be  affirmed,  with  costs. 

CuLLEN,  Ch.  J.,  Gray,  Edward  T.  Bartlett,  Haight  and 
Werner,  JJ.,  concur;  Hiscock,  J.,  not  sitting. 

Judgment  affirmed. 


TITUSVILLE  IRON  CO.  v.  CITY  OF  NEW  YORK 

Court  of  Appeals  of  New  York,  1912 

(207  N.  Y.  203) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  first  judicial  department,  entered  May  8,  1911, 
affirming  a  judgment  in  favor  of  defendants  entered  upon  a  dis- 
missal of  the  complaint  by  the  court  at  a  Trial  Term. 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  are 
stated  in  the  opinion, 

CuLLEN,  Ch.  J.  On  January  27th,  1906,  one  Hillman  entered 
into  a  contract  with  the  defendant  board  of  education  to  furnish 
and  install  a  heating  and  ventilating  apparatus  in  a  public  school. 
Subsequently  the  plaintiff  sold  and  delivered  to  Hillman  certain 
boilers,  castings  and  other  parts  of  a  hearing  apparatus  which 
Hillman  intended  to  use  in  the  performance  of  his  contract,  but, 
so  far  as  appears  in  the  evidence,  were  not  installed  in  the  building, 
nor  delivered  to  or  accepted  by  the  board  of  education.    The  plain- 


68  CONVEYANCE 

tiff  was  never  paid  by  Hillman  for  the  property.  In  June  followino; 
proceedings  in  involuntary  bankruptcy  were  commenced  against 
Hillman,  and  on  the  18th  of  that  month  a  receiver  of  his  estate 
was  appointed  by  the  United  States  District  Court.  On  July  9th 
Hillman  was  adjudicated  a  bankrupt.  Meanwhile,  on  the  27th 
of  June,  the  board  of  education  declared  Hillman's  contract  for- 
feited under  the  following  provision  contained  therein: 

"If  the  work  to  be  done  under  this  contract  shall  be  abandoned 
by  the  contractor,  or  if  this  contract  shall  be  assigned,  or  the  work 
sublet  by  him,  otherwise  than  is  herein  specified,  or  if  the  contractor 
shall  at  any  time  refuse  or  neglect  to  supply  a  sufficiency  of  work- 
men and  materials  of  the  proper  skill  and  quality,  or  shall  fail  in 
any  respect  to  prosecute  the  work  required  by  this  contract  with 
promptness  and  diligence,  or  shall  omit  to  fulfill  any  provision 
herein  contained,  or  if  at  any  time  the  superintendent  of  school 
buildings  shall  be  of  the  opinion  and  shall  so  certify  in  writing  to 
the  committee  on  buildings,  that  the  performance  of  the  contract 
is  unnecessarily  or  unreasonably  delayed,  or  that  the  contractor  is 
wilfully  violating  any  of  the  conditions  or  covenants  of  this  con- 
tract or  specifications,  or  is  executing  the  same  in  bad  faith,  or  not 
in  accordance  with  the  terms  thereof,  or  if  the  work  be  not  fully 
completed  within  the  time  named  in  the  contract  for  its  comple- 
tion, the  committee  on  buildings  shall  notify  the  contractor  to 
discontinue  all  work,  or  any  part  thereof,  under  this  contract,  by 
written  notice,  signed  on  behalf  of  said  committee  by  its  chairman 
or  acting  chairman,  to  be  served  upon  the  contractor  either  per- 
sonally or  by  leaving  said  notice  at  his  place  of  residence  or  busi- 
ness, or  with  his  agent  in  charge  of  the  work,  or  with  an  employe 
found  on  the  work,  and  thereupon  the  contractor  shall  discontinue 
the  work  or  such  part  thereof,  and  the  Board  of  Education  shall 
thereupon  have  the  power  to  contract  for  the  completion  of  the 
contract  in  the  manner  prescribed  by  law,  or  to  place  such  and  so 
many  persons  as  it  maj''  deem  advisable,  by  contract  or  otherwise, 
to  work  at  and  complete  the  work  herein  described,  or  such  part 
thereof,  and  to  use  such  materials  as  he  may  find  upon  the  line 
of  the  work  and  to  procure  the  material  for  the  completion,  so  as 
to  fully  execute  the  same  in  every  respect,  and  the  cost  and  ex- 
pense thereof  at  the  reasonable  market  rates  shall  be  a  charge 
against  the  contractor,  who  shall  pay  the  party  of  the  first  part  the 
excess  thereof,  if  any,  over  and  above  the  unpaid  balance  of  the 
amount  to  be  paid  under  this  contract;  and  the  contractor  shall 
have  no  claim  or  demand  to  such  unpaid  balance,  or  by  reason  of 


TITUSVILLE    IRON    CO.    V.    CITY   OF   NEW    YORK  G9 

the  non-payment  thereof  to  him  and  shall  forfeit  all  claim  to  any 
moneys  retained;  and  no  molds,  models,  centres,  scaffolding, 
planks,  horses,  derricks,  tackle,  implements,  power  plants,  or  build- 
ing material  of  any  kind  belonging  to  or  used  by  the  contractor 
shall  be  removed  so  long  as  the  same  may  be  wanted  for  the 
work." 

It  also  directed  the  superintendent  to  proceed  with  the  comple- 
tion of  the  work  in  accordance  with  the  original  plans  and  specifi- 
cations, and  advertised  for  proposals  therefor.  On  August  11th 
the  receiver  of  the  bankrupt  notified  the  board  of  education  that 
he  claimed  the  boilers  and  property  heretofore  mentioned,  and  on 
September  6th,  in  pursuance  of  an  order  made  l)y  the  United  States 
District  Court,  the  receiver  sold  all  his  right  and  title  to  the  plain- 
tiff. On  August  20th  the  board  of  education  entered  into  a  con- 
tract with  the  defendant  Olivany  for  the  performance  of  the  Hill- 
man  contract,  and  in  such  performance  that  defendant,  with  the 
consent  and  at  the  instigation  of  the  board  of  education,  appro- 
priated the  boilers  and  other  property  of  Hillman  and  install(>d 
them  in  the  school  building.  For  this  conversion  the  plaintiff  has 
sued  the  defendants. 

This  brings  us  to  the  consideration  of  the  respective  claims  of 
title  to  the  property.  The  plaintiff  had  no  lien  on  the  property  for 
the  unpaid  purchase  money,  but  at  the  time  of  the  appointment  of 
the  receiver  title  to  the  property  was  in  Hillman.  It  then  became 
vested  in  the  receiver  of  the  bankrupt  and  through  the  sale  by  the 
receiver  passed  to  the  plaintiff  unless,  under  the  provision  of  the 
contract  with  Hillman,  already  quoted,  the  board  of  education 
had  the  right  to  appropriate  the  property.  For  one  reason  at  least 
the  judgment  below  cannot  be  sustained.  Referring  to  the  con- 
tract, it  is  to  be  observed  that  where  a  contract  makes  default  it  is 
provided  that  "the  Committee  of  Buildings  shall  notify  the  con- 
tractor to  discontinue  all  work,  or  any  part  thereof,  ...  by  a  writ- 
ten notice,  signed  on  behalf  of  said  committee  by  its  Chairman," 
to  be  served  on  the  contractor  in  the  manner  specified,  and  "there- 
upon" the  board  of  education  shall  have  power  to  contract  for  the 
completion  of  the  contract,  "and  to  use  such  materials  as  they  may 
find  on  the  line  of  the  work."  The  service  of  the  notice  on  the  con- 
tractor is  made,  by  the  contract,  a  condition  precedent  to  the  right 
to  forfeit  the  contract  and  appropriate  the  materials  of  the  con- 
tractor. The  complaint  was  dismissed  at  the  close  of  the  plaintiff's 
case.  There  was  no  evidence  that  such  a  notice  was  ever  served. 
We  are  willing,  however,  to  dispose  of  the  case  on  this  narrow 


70  CONVEYANCE 

ground,  as  on  the  record  before  us,  even  had  the  notice  been  served, 
still  the  act  of  the  board  would  have  been  wrongful. 

At  the  time  of  the  execution  of  the  contract  Hillman  had  no 
title  to  the  property,  the  subject  of  this  suit,  nor  does  it  appear 
even  that  the  property  Avas  then  in  existence.  Therefore,  he  could 
create  no  lien  thereon  cognizable  at  law,  whether  by  way  of  mort- 
gage, pledge  or  otherwise.  "  It  is  common  learning  in  the  law  that 
a  man  cannot  grant  or  charge  that  which  he  hath  not."  (See 
Thomas  on  Chattel  Mortgages,  sec.  157;  Jones  on  Chattel  Alort- 
gages,  sec.  138.)  Mortgages  or  contracts  pledging  subsequently 
acquired  property,  though  void  at  law,  will  nevertheless  be  en- 
forced in  equity  as  between  mortgagor  and  mortgagee  as  agree- 
ment to  give  liens,  and  also  as  against  purchasers  with  notice. 
{McCaffrey  v.  Woodin,  65  N.  Y.  459;  Kribbs  v.  Alford,  120  id.  519:) 
But  it  seems  settled  law,  at  least  in  this  state,  that  they  will  not 
be  enforced  as  against  creditors.  (Rochester  Distilling  Co.  v. 
Rasey,  142  N.  Y.  570;  Zartman  v.  First  National  Bank  of  Waterloo, 
189  id.  267.)  In  the  first  case  Judge  Gray  said:  "  The  proposition 
that  a  mortgage  upon  chattels  having  no  actual,  nor  potential, 
existence,  can  operate  to  charge  them  with  a  lien,  when  they  come 
into  existence,  as  against  an  attaching,  or  an  execution  creditor, 
has  frequently  been  discountenanced  and  repudiated"  (p.  575). 
In  the  second,  Judge  Vann  said:  "In  other  words,  the  agreement 
and  intention  of  the  parties  to  a  mortgage  upon  property  not 
yet  in  existence  will  be  given  effect  by  a  court  of  equity  so  far  as 
practicable,  provided  no  interest  is  affected  except  that  of  the  mort- 
gagor and  mortgagee,  who  entered  into  the  stipulation,  but  equity 
closes  its  doors  and  refuses  relief  if  the  interests  of  creditors  are  in- 
volved. The  result  thus  announced  is  founded  on  principle  and 
sanctioned  by  authority"  (p'.  272).  In  the  opinions  in  these  two 
cases  the  authorities  are  so  fully  examined  and  discussed  as  to 
make  further  review  unnecessary. 

The  title  of  the  contractor  passed  to  the  receiver  in  bankruptcy 
before  the  forfeiture  authorized  by  the  contract  had  accrued  or  the 
defendant  taken  possession,  and  the  decision  in  Skilton  v.  Coding- 
ton (185  N.  Y.  80)  as  well  as  that  in  the  Zartman  Case  (supra)  are 
authorities  to  the  effect  that  the  trustee  can  assert  the  rights  of 
creditors.  We  must  not  be  misled  by  some  of  the  early  decisions 
of  the  Supreme  Court  of  the  United  States  which  were  made  in 
cases  arising  under  the  Bankruptcy  Act  of  1867.  Under  that  act 
assignee  succeeded  only  to  the  title  of  the  bankrupt  except  in 
cases  where,  by  the  express  terms  of  the  statute,  certain  transac- 


TITUSVILLE    IRON    CO.    V.    CITY    OF   NEW   YORK  71 

tions  were  made  fraudulent  and  void  as  against  the  act.  So  it 
was  held  in  Stewart  v.  Piatt  (101  U.  S.  731)  that  the  assignee  could 
not  attack  chattel  mortgages  void  against  creditors  by  reason  of 
the  failure  to  file  them  in  the  proper  place.  In  Hauselt  v.  Harrison 
(105  U.  S.  401)  an  agreement  somewhat  similar  in  effect  to  that 
before  us  was  held  to  create  a  lien  good  between  the  parties,  even 
though  void  as  against  subsequent  purchasers  without  notice  and 
creditors  levying  executions  and  attachments,  and,  therefore, 
immune  from  attack  by  the  assignee  in  bankruptcy.  This  rule, 
however,  has  been  changed  by  the  present  statute,  which  enacts 
that  "claims  which  for  want  of  record  or  for  other  reasons  would 
not  have  been  valid  liens  as  against  the  claims  of  the  creditors 
of  the  bankrupt  shall  not  be  liens  against  his  estate."  Therefore, 
the  title  of  the  plaintiff  was  superior  to  any  lien  of  the  de- 
fendants. 

Nor  can  the  right  of  the  defendant  to  appropriate  the  property 
as  a  pledge  be  sustained  under  the  law  of  this  state.  Transfer  of 
possession  to  the  pledgee  is  necessary  to  create  a  valid  pledge  and 
the  possession  must  be  actual,  not  merely  constructive,  unless 
from  the  nature  of  the  case  the  property  is  not  susceptible  of  manual 
delivery  and  possession.  (Wilson  v.  Little,  2  N.  Y.  443;  Black  v. 
Bogert,  65  id.  601;  McFarland  v.  Wheeler,  26  Wend.  467.)  There 
is  no  evidence  in  the  case  that  the  board  of  education  ever  had  any 
control  or  possession  of  the  property  prior  to  the  bankruptcy. 
Agreement  between  the  parties  could  not  make  that  possession 
which  was  not  in  fact  such.  {McFarland  v.  Wheeler,  supra.)  At 
most,  delivery  of  possession  was  a  question  of  fact  for  the  jury. 
(Seidenhach  v.  Riley,  111  N.  Y.  560.) 

There  is  a  vital  distinction  between  the  contract  in  the  case  of 
Diiplan  Silk  Co.  v.  Spencer  (115  Fed.  Rep.  689),  and  the  one  in  the 
case  at  bar.  There,  as  pointed  out  in  the  opinion,  there  was  no 
forfeiture  of  unused  materials,  but  they  were  applied  to  the  com- 
pletion of  the  contract,  and  if  the  contract  was  completed  at  a  cost 
less  than  that  which  would  be  due  the  contractor,  had  he  finished 
the  contract,  he  was  entitled  to  the  surplus.  In  the  present  case 
it  is  expressly  provided  that  the  contractor  shall  have  no  claim  for 
any  unpaid  balance  and  shall  forfeit  all  claims  to  any  monej'S  re- 
tained. Therefore,  if  on  the  other  questions  the  case  cited  were 
an  authority  in  this  state,  the  distinction  pointed  out  would  make 
the  decision  there  rendered  inapplicable  to  the  present  case.  It 
is  to  be  also  noted  that  in  the  Duplan  Silk  Co.  case  the  opinion 
•cites  the  old  cases  of  Hauselt  v.  Harrison  and  Stewart  v.  Piatt, 


72  CONVEYANCE 

to  which  I  have  ah-eady  referred  and  which  are  not  authorities 
under  the  present  Bankruptcy  Act. 

The  jutlgnient  appealed  from  so  far  as  relates  to  the  defendants 
board  of  education  and  Olivany  should  be  reversed  and  a  new 
trial  granted,  with  costs  to  abide  the  event. ^ 

Haight,  Vann  and  Willard  Bartlett,  JJ.,  concur  with  CuL- 
LEN,  Ch.  J.,  and  Hiscock,  J.,  concurs  in  result;  Collin,  J.,  absent. 

Judgment  accordingly. 


PIERCE  V.   EMERY 

Supreme  Judicial  Court  of  New  Hampshire,  1856 

(32  N.  H.  484) 

Bill  in  Equity.  The  following  facts  appear  from  the  state- 
ments of  the  bill.- 

The  Portsmouth  and  Concord  Railroad,  a  corporation  estab- 
lished under  the  laws  of  New  Hampshire,  made  to  the  complain- 
ants, Joshua  W.  Pierce,  Alfred  W.  Haven,  Josiah  G.  Hadley  and  to 
Alexander  Ladd,  deceased,  whose  executrix,  Maria  T.  Ladd,  is  the 
remaining  plaintiff,  sundry  mortgages,  dated  respectively  Febru- 
ary 12,  1850,  July  6,  1850,  March  10,  1851,  May  29,  1851,  Au- 
gust 19,  1851,  and  March  3,  1852,  and  also  made  sundry  other 
mortgages  to  Joshua  W.  Pierce  and  Alfred  W.  Haven,  two  of  the 
complainants,  dated  respectively  June  26,  1852,  July  13,  1852, 
August  16,  1852,  October  15,  1852,  November  16,  1852,  Decem- 
ber 26,  1852,  February  12,  1853,  June  27,  1854,  September  23, 
1854,  and  April  12,  1855. 

The  mortgages  were  of  personal  property,  and  the  bill  set  forth 
a  description  of  it  as  contained  in  the  different  mortgages,  and 
specified  the  debts  and  liabilities  secured  by  each.  By  the  first 
two  mortgages,  made  prior  to  August  20,  1850,  besides  specific 
articles  named  in  the  mortgages,  all  the  personal  property  of  the 
railroad  was  mortgaged;  and  by  the  subsequent  mortgages  the 
furniture  of  the  road,  locomotives,  cars,  fencing  stuff,  fuel,  and 
other  personal  property,  were  mortgaged  from  time  to  time,  in 
some  cases  to  secure  debts  that  accrued  before  August  20,  1850, 
and  in  others,  debts  which  accrued  after  that  date;  but  none  of 

1  Concurring  opinion  of  Chase,  J.,  -  This  statement  of  facts  has  been 

is  omitted.  abbreviated. 


PIERCE    V.    EMERY  73 

the  mortgages  were  given  on  the  sale  of  property  to  the  roail  for 
securit}^  of  the  purchase  money. 

The  mortgage  of  June  26,  1852,  conveyed  all  the  right,  title  and 
interest  of  the  railroad  to  the  railroad  iron  imported  in  the  ship 
General  Berr}^,  then  belonging  to  the  road,  subject  to  the  lien  of 
the  United  States  for  duties,  being  about  591  tons,  to  secure  a 
note  for  $10,000,  dated  April  26,  1852.   .  .  . 

The  several  mortgages  under  which  the  plaintiffs  claim  remain 
in  whole  or  in  part  unsatisfied.  All  the  property  described  in  the 
mortgages  made  after  August  20,  1850,  was  purchased  by  and 
came  to  the  possession  of  the  road  subsequently  to  that  date; 
and  all  the  property  named  in  the  mortgages  running  to  Pierce  and 
Haven,  with  the  exception  of  the  iron,  was  paid  for  with  money 
lent  to  the  road  by  the  parties  named  in  those  mortgages,  as  is 
stated  therein.  In  all  these  mortgages  it  is  stated  that  they  were 
given  for  the  security  of  the  parties  named  in  them  respectively. 
All  these  mortgages  were  duly  executed  and  recorded  in  Ports- 
mouth, which  was  by  law  established  as  the  place  of  business  for 
the  road.  .  .  . 

On  the  13th  of  July,  1850,  the  Legislature  of  this  State  passed 
an  act  entitled  "An  act  to  aid  the  construction  of  the  Portsmouth 
and  Concord  Railroad,"  authorizing  the  road  to  issue  bonds  to  the 
amount  of  $350,000,  paj^able,  with  interest,  in  not  less  than  ten, 
nor  more  than  twenty  years;  the  act  to  take  effect  when  the  stock- 
holders should  accept  and  adopt  it.  .  .  . 

On  the  3d  of  August,  1850,  the  stockholders  met,  accepted  the 
act,  and  authorized  the  directors  to  appoint  trustees,  make  a  mort- 
gage, and  issue  bonds  at  their  discretion.  On  the  20th  of  August, 
1850,  the  directors  made  a  mortgage  to  Robert  Rice,  William 
Plumer,  Jr.,  and  Josiah  Minot,  trustees  for  those  who  were  or 
should  become  holders  of  the  bonds,  to  secure  payment  of  bonds  to 
the  amount  of  $350,000,  issued  the  same  day.  The  original  trus- 
tees, by  death  and  resignation,  are  now  out  of  that  office,  and  the 
defendants,  James  W.  Emer}^,  Thomas  L.  Tullock  and  Nathaniel 
White,  are  substituted  by  appointments  made  under  the  act  and 
mortgage. 

The  mortgage  deed  to  the  trustees  recites  that  the  trustees  had 
been  appointed  under  the  act  to  take  and  hold  security  on  all  the 
property  of  said  company,  and  all  its  rights,  franchises,  powers  and 
privileges,  in  mortgage  and  in  trust,  for  the  payment  and  security 
of  whoever  then  or  thereafter  might  become  the  lawful  holders  of 
said  bonds,  or  any  of  them,  and  conveys  to  the  trustees,  in  the 


74  CONVEYANCE 

name  of  the  Portsmouth  and  Concord  Railroad,  "the  railroad  of 
said  corporation,  together  with  all  its  rights,  powers,  franchises  and 
privileges,"  in  the  towns  in  which  it  was  laid  out,  "with  all  the 
lands,  buildings  and  fixtures  thereto  belonging,  or  which  might 
thereafter  thereto  belong,  with  all  the  rights,  franchises,  powers  and 
privileges  now  belonging  to  and  held,  or  which  may  hereafter  be- 
long to,  or  be  held,  by  said  corporation;  together  with  the  locomo- 
tive engines,  passenger,  baggage,  dirt,  freight  and  hand  cars,  and 
all  the  other  personal  property  of  said  corporation,  as  the  same  now 
is  in  use  by  said  corporation,  or  as  the  same  may  be  hereafter 
changed  and  renewed  by  said  corporation;  to  have  and  to  hold  the 
said  railroad,  franchises  and  estate  aforesaid,  whether  real  or  per- 
sonal, with  all  the  privileges  and  appurtenances,  legislative  grants, 
powers,  rights,  and  privileges,  now  or  hereafter  granted,  thereto 
belonging,"  in  trust  for  the  bond-holders,  and  in  mortgage  for  se- 
curity of  the  bonds;  and  the  trustees  are  empowered  by  the  deed, 
on  breach  of  the  condition,  to  sell  "the  said  railroad,"  and  to  make 
all  necessary  conveyances,  "passing  all  the  property,  real,  personal 
and  mixed,  rights,  powers,  franchises  and  privileges  of  this  corpo- 
ration," to  the  purchaser  or  purchasers. 

On  the  same  20th  of  August  the  directors  issued  bonds  to  the 
amount  of  $350,000,  from  which  the  road  reahzed  $289,535,  and 
no  more.  At  that  time  the  road  owed  about  $158,700,  and  have 
since  expended  in  constructing  and  furnishing  the  road  at  least 
$573,000,  and  of  the  debts  then  owing  more  than  $100,000  have 
been  paid. 

The  condition  of  the  mortgage  to  the  trustees  having  been 
broken,  the  present  trustees,  Emery,  Tullock  and  White,  at  the 
request  of  certain  bond-holders,  according  to  the  terms  of  the 
mortgage,  on  the  14th  day  of  May,  1855,  applied  to  the  directors 
to  surrender  to  them  all  the  mortgaged  premises;  and  the  directors 
by  deed  of  surrender,  dated  May  31,  1855,  surrendered  and  trans- 
ferred to  them  all  the  property,  rights,  powers,  franchises  and 
privileges  named  in  the  deed  of  mortgage,  to  hold  according  to  the 
terms  and  conditions  thereof.  The  trustees  have  taken  possession 
of  the  road,  and  under  their  mortgage  claim  the  property  mort- 
gaged to  the  complainants;  and  the  property  has  been  delivered 
into  the  hands  of  the  trustees,  under  an  agreement  that  it  should 
be  used  in  operating  the  road,  and  a  compensation  paid  for  it. 

The  stockholders  have  voted  that  it  is  inexpedient  to  redeem 
the  road  and  its  property  from  the  mortgage  to  the  trustees,  and 
under  the  provisions  of  the  mortgage  the  trustees  will  be  bound 


PIERCE    V.    EMERY  <0 

to  sell,  in  about  eight  months  from  the  31st  of  May,  1855,  and 
they  threaten  to  include  in  their  sale  the  property  mortgaged  to 
the  complainants. 

The  original  trustees,  when  they  took  their  mortgage,  had  notice 
of  the  prior  mortgages,  and  also  many  persons  who  afterwards  be- 
came purchasers  and  holders  of  the  bonds. 

The  present  trustees  and  the  Portsmouth  and  Concord  Rail- 
road are  the  parties  defendant  to  the  bill. 

The  bill  prays  that  the  trustees  may  be  decreed  to  pay  the  com- 
plainants the  debt  secured  by  their  mortgage,  before  they  sell 
the  property  mortgaged  to  the  complainants,  and  be  enjoined  not 
to  sell  until  they  pay;  or,  if  allowed  to  proceed  with  the  sale,  may 
be  decreed  to  pay  out  of  the  proceeds  the  debts  secured  by  the 
complainants'  mortgage,  for  a  foreclosure  and  for  general  relief. 

Perley,  C.  3}  Corporations,  as  a  general  rule,  have  power  to 
sell  their  property,  real  and  personal,  and  to  mortgage  it  for  the 
security  of  their  debts  (Com.  Dig.,  Corporation,  F,  18;  Barry  v. 
Merchants'  Exchange  Co.,  1  Sand.  Ch.  280;  Despatch  Line  of  Pack- 
ets V.  Bellamij  Manuf.  Co.,  12  N.  H.  206). 

Railroads,  by  the  law  of  this  State,  are  public  corporations,  so 
far  as  to  be  subject  in  many  respects  to  general  legislation  and  the 
control  of  the  public  authorities.  They  are  created  to  answer  a 
public  object,  and  are  bound  to  the  State  for  the  performance  of 
their  public  duty.  They  can  do  no  act  which  would  amount  to  a 
renunciation  of  their  duty  to  the  pubhc,  or  which  would  directly 
and  necessarily  disable  them  from  performing  it.  They  cannot 
convey  away  their  franchise  and  corporate  rights,  nor  perhaps  the 
track  and  right  of  way  which  they  take  and  hold  for  the  necessary 
use  of  their  road. 

But  they  may  contract  debts;  may  purchase  on  credit;  and 
we  see  nothing  in  the  nature  of  their  business,  or  in  their  rela- 
tion to  the  public,  which  should  prevent  them  from  making  a 
valid  mortgage  of  their  personal  property,  not  affixed  to  the  road, 
though  used  in  the  operation  of  it.  Instead  of  disabling  the  road 
from  performing  its  public  dut}^,  a  mortgage  might  assist  in  doing 
it,  in  the  same  way  that  other  corporations  or  individuals  are 
aided  in  carrying  on  their  business  by  mortgages  of  their  property. 

The  two  mortgages  made  to  the  complainants  before  the  mort- 
gage to  the  trustees  for  the  bond-holders,  we  think  are  valid  to  hold 
the  personal  property  specifically  described  in  them  for  the  security 
^  Portions  of  the  opinion  have  been  omitted. 


76  CONVEYANCE 

of  SO  much  of  the  debts  as  remain  unpaid.  The  bill  does  not  state 
how  much  of  those  debts  are  still  due.  But  the  complainants  have 
no  right  in  the  road  by  virtue  of  those  mortgages;  they  must  as- 
sert their  security  by  taking  the  property  away,  as  in  the  case  of  a 
mortgage  by  an  individual. 

A  different  and  more  difficult  question  arises  as  to  the  claim  of 
the  complainants  under  mortgages  made  after  the  20th  of  August, 
1850,  the  date  of  the  mortgage  to  the  trustees  for  the  bond-holders. 

The  ground  taken  by  the  bond-holders  is  that  the  act  of  the 
Legislature  authorized  a  mortgage,  not  only  of  the  property  which 
at  the  time  belonged  to  the  road,  but  of  all  the  franchises  and  cor- 
porate rights  of  the  road,  and  the  road  itself;  that  the  trustees 
under  such  a  mortgage  would  take,  as  security  for  the  bonds,  the 
railroad  and  all  its  franchises  and  rights,  as  one  entire  thing,  and 
that,  as  incident  to  this  mortgage  of  the  road  and  its  franchise,  all 
the  property,  real  and  personal,  which  might  at  any  time  after- 
wards become  vested  in  the  road,  would  be  covered  by  the  mort- 
gage, and  held  by  the  trustees,  subject  to  the  right  in  the  directors, 
until  breach  of  the  condition,  of  managing  the  road  for  the  benefit 
of  all  concerned,  and  of  selling  such  of  the  property  from  time  to 
time  as  might  be  convenient  in  the  course  of  the  business,  provided 
they  substituted  other  property  of  equal  value;  that  when  the 
trustees  should  make  a  sale  under  their  mortgage,  all  the  property, 
and  all  the  franchises  and  corporate  rights  of  the  road  would  pass 
to  the  purchasers,  subject  in  their  hands  to  the  public  liabilities 
and  duties  of  the  corporation;  that  the  mortgage  deed  in  this  case 
exhausts  the  powers  conferred  by  the  act,  and  covers  the  road  and 
its  franchises,  and  the  accruing  property,  as  an  accession  to  the 
thing  mortgaged  and  as  part  and  parcel  of  it;  that  consequently 
the  lien  of  the  mortgage  to  the  trustees  attached  upon  property 
subsequently  acquired  immediately  upon  its  vesting  in  the  road, 
and  the  claim  of  the  complainants  must  be  postponed  to  the  mort- 
gage made  for  security  of  the  bond-holders.  Whereas,  the  com- 
plainants maintain  that  the  act  confers  no  power  to  make  such  a 
mortgage,  and  that  the  mortgage  to  the  trustees  does  not  cover 
property  of  the  road  subsequently  acquired. 

We  take  it  to  be  a  general  rule  of  the  common  law  that  nothing^ 
can  be  mortgaged  that  is  not  in  existence,  and  does  not  at  the  time 
of  the  mortgage  belong  to  the  mortgagor  {Tapfield  v.  Hillman, 
4  M.  &  G.  240;  Lunn  v.  Thurston,  1  M.,  G.  &  S.  383;  Winsloiv  v. 
Merchants'  Ins.  Co.,  4  Met.  306;  Jones  v.  Richardson,  10  Met.  488; 
Moody  V.  Wnght,  13  Met.  17). 


\ 


PIERCE    V.    EMERY  77 

This  rule,  that  a  mortgage  nannot  cover  future  acquisitions, 
would  seem  to  have  been  established  on  the  technical  ground  that 
a  mortgage  is  a  sale  upon  condition,  and  by  the  common  law  there 
could  be  no  sale  of  a  thing  not  in  esse,  and  not  at  the  time  the  prop- 
erty of  the  seller. 

By  the  civil  law  a  mortgage  may  cover  the  future  property  of 
the  mortgagor  (Domat.,  part  1,  book  3,  tit.  1,  §  1,  articles  5  and  7). 
And  in  some  jurisdictions  where  the  maxims  of  the  common  law 
prevail,  mortgages  have  been  sustained  covering  the  future  and 
shifting  stock  of  a  trading  or  manufacturing  establishment;  as  in 
the  case  of  Holly  v.  Brown,  14  Conn.  255.  So  in  Abbott  v.  Good- 
win,  20  Maine,  408,  a  mortgage  of  a  stock  in  trade  and  of  the  sub- 
stituted goods  was  held  to  be  valid.  And  such  a  mortgage  was  sus- 
tained against  an  assignee  in  bankruptcy  in  Mitchell  v.  Winslow, 
2  Story,  630.  In  these  cases,  not  merely  the  existing  property,  but 
also  the  business  and  establishment  appear  to  have  been  regarded 
as  the  subjects  of  the  mortgage;  and  the  mortgagor,  while  he  re- 
mained in  possession,  was  looked  upon  in  the  light  of  an  agent  for 
the  mortgagee,  so  far  as  his  interest  was  concerned,  with  an  implied 
authority  to  buy  and  sell,  and  manage  generally,  according  to  the 
usual  course  of  the  business. 

Even  where  the  strict  rule  against  the  mortgaging  of  subse- 
quently acquired  property  is  enforced,  if  the  mortgage  purport  to 
cover  such  property,  and  the  mortgagee  take  possession,  with 
assent  of  the  mortgagor,  before  another  title  attaches,  he  will  hold 
from  time  to  time,  not  as  mortgagee,  but  as  pawnee,  under  the  con- 
tract contained  in  the  mortgage  (Rowley  v.  Rice,  11  Met.  333).  And 
in  mortgages  of  real  estate  it  is  a  familiar  rule  that  buildings,  and 
other  things  annexed  to  land  after  the  mortgage,  are  regarded  as 
accessions  to  the  original  subject  of  the  mortgage,  and  covered  by 
it  (Pettingill  v.  Evans,  5  N.  H.  54). 

There  is,  therefore,  no  intrinsic  difficulty  in  a  mortgage  which 
should  cover  the  future  and  shifting  stock  and  property  of  a  trad- 
ing or  manufacturing  establishment,  or  of  a  corporation.  But  by 
the  common  law,  according  to  the  weight  of  authority  in  other 
jurisdictions,  and  as  we  understand  the  rule  to  be  in  this  State,  no 
mortgage  can  be  made  to  cover  any  personal  property,  except 
specific  articles  belonging  to  the  mortgagor  at  the  time  of  the  mort- 
gage; and,  unaided  by  the  special  act  of  the  Legislature,  the  rail- 
road in  this  case  would  have  no  power  to  make  a  mortgage  that 
should  have  the  effect  contended  for  by  the  l)ond-holders.  The 
question  whether  the  trustees  can  hold  subsequently  acquired 


78  CONVEYANCE 

property  against  the  claim  of  the  complainants,  will,  therefore, 
depend  on  the  construction  of  that  act  and  of  the  mortgage  deed 
made  under  it.  Did  the  act  authorize  the  road  to  make  a  mort- 
gage which  should  cover  property  of  the  road  afterwards  acquired? 
and  if  so,  did  the  directors  make  such  a  mortgage  in  this  instance? 

The  word  "franchise,"  so  often  used  in  the  act  and  in  the  deed, 
has  various  significations,  both  in  a  legal  and  popular  sense.  A  cor- 
poration is  itself  a  franchise  belonging  to  the  members  of  the  cor- 
poration; and  a  corporation,  being  itself  a  franchise,  may  hold 
other  franchises,  as  rights  and  franchises  of  the  corporation.  A 
municipal  corporation,  for  instance,  may  have  the  franchise  of  a 
market,  or  of  a  local  court;  and  the  different  powers  of  a  private 
corporation,  like  the  right  to  hold  and  dispose  of  property,  are  its 
franchises.  In  a  more  popular  sense  the  political  right  of  subjects 
and  citizens  are  called  franchises,  like  the  electoral  franchise  (Com. 
Dig.,  Franchise,  F,  I.;  Angell  &  Ames  on  Corp.  3;  The  King  v. 
London,  Skinner,  310,  311). 

A  corporation,  being  itself  a  franchise,  consists  and  is  made  up 
of  its  rights  and  franchises;  and  when  all  its  franchises  are  gone, 
by  surrender,  by  forfeiture  judicially  ascertained,  by  Kmitation  of 
the  grant,  or  in  any  other  way,  the  corporation  has  no  longer  any 
practical  existence.  If  the  franchise  or  franchises  are  of  a  nature 
to  continue  after  they  are  lost  by  the  corporation,  they  may  be 
regranted  to  another  corporation,  or  to  other  individuals;  but  the 
former  corporation  is  substantially  dissolved  (2  Kent's  Com.  305, 
and  note  a,  308  and  309;  The  King  v.  Pasmore,  3  T.  R.  199;  Com. 
V.  Hancock  Bridge,  2  Gray,  59,  60). 

The  grant  of  a  corporation  is  a  contract  between  the  State  grant- 
ing it  and  the  grantees.  It  is  peculiarly  and  emphatically  so  in 
the  case  of  railroad  corporations,  which  are  created  upon  public 
considerations,  and  clothed  with  extensive  and  extraordinary  pow- 
ers, for  the  purpose  of  enabling  them  to  accomphsh  the  public 
object  contemplated  in  the  grant.  The  members  and  stockholders 
have  private  rights;  but  the  corporations  are  also  bound  to  the 
discharge  of  their  public  duties,  and  cannot,  without  the  aid  of 
special  legislation,  disable  themselves  from  performing  their  duty 
to  the  pubUc  by  alienating  or  transferring  their  corporate  rights 
and  franchises.  They  may  sell  or  mortgage  their  personal  prop- 
erty, but  they  cannot  sell  or  mortgage  with  it  the  right  to  manage 
and  control  the  road,  nor  any  other  corporate  right  or  franchise 
{The  King  v.  The  Severn  &  Wye  R.  W.  Co.,  2  B.  &  Aid.  646;  Reg.  v. 
The  Eastern  Cmnties  R.  W.,  10  Adol.  &  Ellis,  531;  Reg.  v.  South 


PIERCE    V.    EMERY  79 

Wales  R.  W.  Co.,  14  Ad.  &  Ellis  (N.  S.),  902;  Clark  v.  Washington, 
12  Wheaton,  46,  54;  Winchester  &  Lexington  Turnpike  R.  Co.  v. 
Vimoyit,  5  B.  Monroe,  1;  Arthur  v.  The  Commercial  &  R.  R.  Bank, 
9  S.  &  M.  394). 

If  this  corporation  had  authority  to  make  a  mortgage  that  should 
convey  the  franchise  and  corporate  rights,  the  power  must  be  de- 
rived from  the  special  act.  It  is  a  very  familiar  rule  in  the  inter- 
pretation of  statutes  that  all  parts  of  the  act  must  be  considered 
together,  and  such  construction  given  to  it  as  will  best  answer  the 
intention  of  the  makers.  To  accomphsh  this  object,  in  some  cases 
the  letter  of  the  statute  may  be  restrained  by  an  equitable  construc- 
tion; in  others,  enlarged;  and  sometimes  the  construction  may  be 
even  contrary  to  the  letter  {Holbrook  v.  Holhrook,  1  Pick.  250; 
Somerset  v.  Dighton,  12  Mass.  384).  On  examination  of  this  act 
it  will  at  once  be  seen  that  the  several  parts  cannot  all  take  effect 
in  the  sense  that  would  most  naturally  belong  to  each,  if  they  were 
considered  separately.  In  the  third  section  the  directors  are  author- 
ized to  mortgage  "the  whole  or  a  part  of  the  real  or  personal  estate 
of  said  corporation."  Stopping  here,  and  taking  this  clause  by 
itself,  no  inference  can  be  drawn  from  it  of  an  intention  to  give  the 
power  of  mortgaging  the  franchises  or  future  acquisitions  and  ac- 
cessions of  personal  or  real  estate.  This  is  the  clause  in  which 
the  authority  to  mortgage  is  directly  conferred.  If  a  more  exten- 
sive power  were  intended  to  be  given  by  the  act,  why  is  no  mention 
made  of  it  here?  The  argument  drawn  from  this  part  of  the  act 
against  the  construction  contended  for  by  the  bond-holders,  goes 
upon  the  ground  that  this  clause  was  intended  to  include  and  define 
all  the  powers  of  mortgaging  conferred  by  the  act. 

But  by  the  same  section  the  trustees  are  authorized  to  sell,  ac- 
cording to  the  conditions  and  limitations  that  may  be  contained  in 
the  mortgage  deed,  "the  real  and  personal  estate,  and  all  rights, 
franchises,  powers  and  privileges  named  in  said  mortgage  deed." 
The  directors  therefore  are  authorized  to  Jianie  in  the  mortgage 
deed,  not  only  the  real  and  personal  estate,  but  rights,  franchises, 
powers  and  privileges  of  the  corporation.  The  rights  and  franchises 
named  in  the  deed  are  to  be  disposed  of  by  sale,  to  enforce  the 
mortgage  security  in  the  same  way  with  the  property  mortgaged ; 
and  there  is  nothing  from  which  it  can  be  inferred  that  the  rights 
and  franchises,  and  the  property  of  the  corporation,  are  not  to  be 
named  in  the  same  way  and  conveyed  in  the  same  way  by  the 
deed;  that  is  to  say,  the  rights  and  franchises  are  to  be  conveyed 
and  mortgaged  like  the  property,  and  are  to  be  disposed  of  under 


80  CONVEYANCE 

the  mortgage  for  the  same  purpose,  and  in  exactly  the  same  man- 
ner. The  directors  may  name  in  the  mortgage — in  other  words, 
they  may  convey  in  mortgage — any  part  or  all  the  real  and  per- 
sonal property,  and  any  or  all  the  rights,  franchises,  powers  and 
privileges  of  the  corporation.  The  act  sets  no  limit  on  their  dis- 
cretionary power  in  this  respect;  and  whatever  the  directors  name 
in  the  mortgage  which  they  give  in  behalf  of  the  road,  is  to  be 
disposed  of  in  the  same  way  for  the  satisfaction  of  the  mortgage 
debt,  whether  it  be  the  property  or  the  rights  and  franchises  of  the 
corporation.  The  power  to  mortgage  the  rights  and  franchises, 
as  well  as  the  property  of  the  corporation,  is  plainly  and  necessarily 
implied  from  these  provisions  of  the  act. 

The  act,  therefore,  does  not  limit  the  power  of  mortgaging  to 
real  and  personal  property  on  hand  at  the  time,  but  gives  author- 
ity to  mortgage  the  rights  and  franchises  of  the  corporation,  which 
eould  not  be  done  without  the  aid  of  the  act.  And  it  cannot  bo 
maintained  that  the  authority  to  mortgage  real  and  personal  prop- 
erty given  in  one  part  of  the  act,  was  intended  to  be  exclusive  of 
all  further  power,  when  the  further  power  of  mortgaging  the  rights 
and  franchises  of  the  corporation  is  clearly  given  by  necessary  im- 
plication in  another  part  of  the  same  section.  .  .  . 

The  directors  then  had  power  under  the  act  to  name  in  their 
mortgage,  and  to  convey  in  mortgage  to  trustees,  all  the  property, 
and  all  the  rights,  franchises,  powers  and  privileges  of  the  corpora- 
tion. If  they  made  such  a  mortgage  it  would  convey  to  the  mort- 
gagees all  the  right  and  power  which  the  corporation  had  to  acquire 
and  hold  property,  for  the  power  to  acquire  and  hold  property  is 
one  of  the  rights  and  franchises  of  the  corporation.  That  right 
would  be  conveyed  and  transferred  from  the  road  to  the  trustees 
by  the  mortgage  deed,  in  the  same  way  that  the  property  was  con- 
veyed and  transferred,  subject  to  the  condition  of  the  mortgage; 
and  the  subsequently  acquired  property  would  pass  under  the  mort- 
gage as  incident  to  the  right  of  acquiring  and  holding  it,  which 
would  be  vested  in  the  trustees  by  the  mortgage. 

The  purchasers  under  the  deed  of  the  trustees  "acquire  all  the 
rights,  franchises,  powers  and  privileges  which  said  corporation 
possessed,  and  the  use  of  said  railroad,  with  all  its  property  and 
rights  of  property,  for  the  same  purposes  and  to  the  same  extent 
that  said  corporation  could  use  the  same,  if  said  deeds  had  not  been 
made,  subject  to  the  same  liabilities  as  to  the  use  of  said  railroad 
that  said  corporation  would  be  under  if  said  deed  had  not  been 
made."    All  this  the  purchasers  take  through  a  sale  authorized  to 


PIERCE    V.    EMERY 


81 


enforce  the  mortgage  security;  and  we  cannot  understand  tliat 
anything  different  from  this,  or  less  than  this,  was  authorized  to  be 
mortgaged  and  covered  by  the  mortgage  for  the  security  of  the 
mortgage  debts.  It  is  contrary  to  all  the  received  notions  of  a 
mortgage  that  anything  should  be  sold  under  it  to  pay  the  delfts 
secured,  that  was  not  mortgaged  and  covered  by  it  before  the  sale. 
It  would  seem  to  be  the  plain  intention  of  the  act  to  preserve 
the  corporate  rights  and  franchises,  and  maintain  the  corporate 
Habilities  in  the  hands  of  the  purchasers  at  the  trustees'  sale.  All 
the  rights  and  franchises  of  the  corporation,  and  the  use  of  the 
road,  are  transferred  to  them  by  the  deed  of  the  trustees,  and  they 
hold  the  corporate  rights  and  franchises,  subject  to  the  same  liabil- 
ities as  to  the  use  of  the  road  by  which  the  corporation  was  bound 
before  the  sale.  They  have  all  the  property  and  all  the  rights  and 
franchises,  and  are  likewise  bound  to  perform  all  the  public  duties 
of  the  corporation.  It  is  not  easy  to  see  how  the  original  corpora- 
tion, in  the  hands  of  the  former  corporators,  could,  after  such  a 
sale,  have  any  practical  or  even  legal  and  theoretical  existence. 
They  could  hold  no  property;  they  could  maintain  no  action,  nor 
elect  any  corporate  officer;  these  powers  are  all  rights  and  fran- 
chises of  the  corporation,  created  and  granted  by  the  act  of  incor- 
poration, and  are  all  transferred  and  conveyed  by  the  deed  of  the 
trustees  to  the  purchasers  under  their  sale.  In  some  cases,  after 
the  franchises  of  a  corporation  are  lost  by  forfeiture,  the  corpora- 
tion is  still  held  to  exist  in  contemplation  of  law,  so  far  as  to  be 
capable  of  being  revived  by  a  regrant  from  the  government.  But 
here  the  franchises  would  not  be  forfeited  to  the  State,  but  trans- 
ferred to  the  purchasers;  and  the  State  could  not  revive  the  old 
corporation  by  a  regrant  of  the  franchises,  which  had  become 
vested  in  the  purchasers.  The  sale  would  in  substance  transfer 
the  road  and  the  corporation  to  the  purchasers. 

There  may  be  a  difficulty,  which  it  is  not  necessary  to  anticipate, 
in  saying  how  the  purchasers  shall  exercise  some  of  these  rights. 
There  is  no  provision  in  the  act  for  their  doing  it  through  the 
machinery  of  the  old  corporation.  They  may,  perhaps,  be  regarded 
somewhat  in  the  light  of  new  grantees  of  the  old  franchises 

If,  then,  the  purchasers  under  the  trustees'  sale  take  what  was 
originally  mortgaged,  and  take  all  the  property,  rights  and  fran- 
chises of  the  corporation,  to  hold  and  enjoy  as  the  corporation 
held  and  enjoyed  them,  they  take  substantially  the  corporation 
itself;  and  the  corporation  itself  was  the  thing  originally  mort- 
gaged. ... 


82  CONVEYANCE 

An  analysis  of  the  act  and  an  examination  of  the  several  parts, 
when  taken  together  and  compared  with  each  other,  lead  to  the 
conclusion  that  the  Legislature  intended  to  grant  the  power  of 
mortgaging  all  the  property  and  all  the  rights  and  franchises  of 
the  corporation,  including  the  right  to  property  subsequently  ac- 
quired. We  have  not  been  able  to  discover  anything  in  the  act 
which  directly  contradicts,  or  by  any  necessary  implication  ex- 
cludes this  construction.  There  are  express  grants  of  particular 
powers  in  different  parts  of  the  act,  from  which  the  argument  is 
drawn,  that  nothing  more  than  is  there  expressed  was  intended  to 
be  granted  elsewhere.  For  instance,  in  one  clause  authority  is 
given  to  mortgage  all  or  part  of  the  real  or  personal  property  of 
the  road.  But  it  is  quite  plain  from  other  provisions  that  this  was 
not  intended  to  be  the  limit  of  the  authority  conferred.  The  pro- 
visions for  the  sale  and  transfer  to  the  purchasers  under  the  mort- 
gage of  all  the  rights  and  franchises  are  practically  inconsistent 
with  such  a  narrowed  construction  of  the  act.  The  material  and 
substantial  provisions  of  the  act  cannot  be  carried  into  effect  with- 
out construing  it  to  give  the  power  of  mortgaging  the  road,  and 
all  its  rights  and  franchises,  as  an  entire  thing,  and  subsequently 
acquired  property,  as  an  incident  to  the  general  subject  of  the 
mortgage,  and  an  accession  to  it. 

The  general  design  and  object  of  the  act  favor  the  same  con- 
struction. The  corporation  already  had  power  under  the  general 
law  to  mortgage  their  property  then  in  possession,  and  for  that 
purpose  had  no  need  of  special  legislation.  The  act  must  have 
intended  to  enlarge  that  power,  and  authorize  the  road  to  make  a 
mortgage  substantially  different  from  such  as  are  allowed  at  com- 
mon law;  and  that  intention  would  not  be  answered  if  the  act 
should  be  so  consti'ued  as  to  limit  the  power  of  mortgaging  to  prop- 
erty then  owned  by  the  road.  The  act  is  entitled  "An  act  to  aid 
in  the  construction  of  the  Portsmouth  and  Concord  Railroad." 
The  road  was  unfinished,  and  the  money  borrowed  on  the  security 
of  the  mortgage  was  to  go  into  the  road,  to  assist  in  the  enterprise 
and  undertaking.  The  statements  of  the  bill  show  that  at  the 
time  when  the  mortgage  to  the  trustees  was  made,  all  the  personal 
property  of  the  road  had  been  already  mortgaged  to  these  com- 
plainants for  the  security  of  other  debts.  There  is  nothing  in  the 
case  which  furnishes  any  ground  to  infer  that  the  road  had  then 
any  unincumbered  property  capable  of  being  mortgaged.  If  so, 
and  the  mortgage  to  the  trustees  could  attach  on  nothing  but 
property  then  belonging  to  the  road,  all  that  the  bond-holders 


PIERCE    V.    EMERY  83 

would  have  under  their  mortgage  for  security  of  their  demands 
would  be  a  right  in  equity  to  redeem  property  of  the  road  already 
mortgaged  for  other  debts.  This,  we  think,  is  not  the  security 
upon  which  the  bond-holders  supposed  they  were  lending  their 
money,  nor  the  security  which  the  Legislature  intended  to  give 
them  by  the  act.  The  general  design  must  have  been  to  give  those 
who  advanced  money  to  complete  the  road  on  credit  of  the  mort- 
gage specially  authorized  by  the  act,  a  substantial  and  available 
security,  and  a  preference  over  other  subsequent  creditors.^ 

But  if  all  subsequently  acquired  property  might  be  mortgaged 
to  secure  other  debts,  new  and  old,  and  those  mortgages  were  up- 
held against  the  bond-holders,  money  might  be  obtained  on  such 
security  to  carry  on  the  road,  to  pay  interest  on  the  bonds,  or  even 
to  pay  dividends,  and  when  possession  should  be  taken  for  the 
bond-holders,  perhaps  at  the  end  of  ten  or  twenty  years,  they  might 
have  little  for  their  security  but  the  franchise  and  road-bed;  for 
much  of  the  iron  and  other  materials  since  affixed  to  the  road  are 
covered  in  terms  by  the  complainants'  mortgages,  and  claimed 
under  them.  If  other  creditors  of  the  road  had  stood  on  such  terms 
with  the  directors  and  managers  as  would  enable  them  to  obtain 
mortgages  of  the  newly  acquired  property,  as  it  fell  from  time  to 
time  into  the  hands  of  the  corporation,  the  bond-holders,  instead 
of  having  a  preference,  would  have  been  the  last  creditors  likely  to 
realize  anything  from  their  security,  in  case  the  road  should  turn 
out  to  be  insolvent. 

The  object  of  the  act  being  to  give  the  bond-holders  a  substan- 
tial and  available  security  for  their  money,  and  a  preference  over 
other  creditors  not  previously  secured,  can  only  be  answered  by  so 
construing  the  law  as  to  give  the  bond-holders  security  upon  the 
road  itself,  as  the  general  subject-matter  of  their  mortgage,  and 
upon  the  changing  and  shifting  property  of  the  road  as  part  and 
parcel,  by  accession,  of  the  thing  mortgaged. 

The  question  is  certainly  not  free  from  difficulty;  but  whether 
we  look  to  the  particular  provisions,  or  follow  what  we  must  un- 
derstand to  have  been  the  general  object  and  design  of  the  law,  we 

^  In  Morrill  v.  Noyes,  56  Me.  458  to    be   subsequently    acquired.      As 

(1863),  the  court  said:  "A  large  part  they  are  made  to  secure  bonds  not 

of    the   numerous   railroads    in    this  to  be  due  for  many  years,  and  the 

country  have  been   constructed   by  rolling  stock  is  perishable,  unless  such 

the  aid  of  mortgages  to  individuals  future  acquisitions  can  be  mortgaged, 

or  to  trustees.    Many  of  these  mort-  as  incident  to,  and  essential  to  the 

gages,   perhaps  most  of  them,   em-  use  of,  the  railroad  itself,  the  security 

brace  specifically,  engines  and  cars,  is  liable  to  be  greatly  diminished." 


84  CONVEYANCE 

are  on  the  whole  brought  to  the  conckision  that  it  authorized  the 
directors  to  mortgage,  not  only  the  property  then  belonging  to  the 
road,  but  all  the  franchises  and  rights  of  the  corporation,  and,  in 
substance,  the  road  and  corporation  itself.  That  if  the  directors 
made  such  a  mortgage,  as  incident  to  the  franchise  and  corporate 
rights  mortgaged,  subsequently  acquired  property,  immediately^ 
upon  its  vesting  in  the  corporation,  would,  as  an  incident  and  by 
accession,  become  part  of  the  thing  originally  mortgaged,  and  of 
the  mortgage  security.  The  right  to  take  and  hold  property  being 
one  of  the  franchises  mortgaged,  the  corporation  would  have  no 
power  to  take  or  hold  property,  except  by  virtue  of  that  franchise 
and  under  the  mortgage  by  which  the  franchise,  was  covered. 

We  are  of  opinion,  then,  that  the  act  authorized  the  corporation 
to  mortgage  the  whole  road  as  an  entire  thing,  with  all  its  corporate 
rights  and  franchises,  and  incidentally,  and  by  way  of  accession, 
all  the  subsequently  acquired  property  of  the  road.  Did  the  direc- 
tors in  fact  make  such  a  mortgage?  .  .  . 

Taking  the  whole  deed  together  the  intention  is  ver}^  apparent 
to  mortgage,  not  merely  property  then  belonging  to  the  road,  but 
the  road  itself  and  all  its  franchises,  as  one  entire  thing,  and,  as  an 
incident  and  accession,  all  property  of  the  corporation  afterwards 
acquired.  And  such  we  think  was  the  legal  operation  of  the  deed 
under  the  act.  .  .  . 

The  demurrer  must  be  overruled,  as  it  is  taken  to  the  whole  bill, 
and  the  complainants  are  entitled  to  part  of  the  relief  for  which 
they  pray.  The  demurrer  may,  however,  be  amended  so  as  to  apply 
to  part  only  o!"  the  bill,  and  the  defendants  answer  to  the  residue.^ 

1  Phillips  V.  Winslow,  18  B.  Mon.  ground  of  an  express  legislative  rati- 

(Ky.)  431   (1857),  accord.     See  also  fication    thereof.      ''This    legislative 

Dinsmore  v.  Racine  &  Miss.  R.  R.  act  obviates  the  second  objection  to 

Co.,  12  Wis.  649,  656  (1860);  Farmers'  the  right  to  maintain  the  action — 

Loan  &  Trust  Co.  v.  Fisher,  17  Wis.  that  a  mortgage  will  not  pass  chat- 

114  (1863),  and  Pierce  v.  Mihvaukee  tels    or    personal    property    not    in 

&  St.  Paul  R.  R.  Co.,  24  Wis.  551  existence,  or  not  owned  by  the  mort- 

(1869).     But  cf.  American  Loan  &  gagor,  at  the  date  of  the  mortgage. 

Trust  Co.   V.   General  Elec.   Co.,   71  The  legal  principles,  stated  by  the 

N.  H.  192,  51  Atl.  660  (1901).  defendant  on  this  point,  are  entirely 

In  Howe  v.  Freeman,  14  Gray,  566  correct  in  reference  to  ordinary  mort- 
•(1860),  the  Supreme  Judicial  Court  gages,  and  would  have  been  fatal  to 
of  Massachusetts  sustained  a  mort-  this  action  if  no  legislative  authority 
gage  of  the  road  and  property  of  a  had  intervened,  ratifying  and  con- 
railroad  "and  all  additions  made  firming  this  particular  mortgage, 
thereto  by  adding  new  locomotives.  But  the  statute  did  thus  intervene, 
rars,    and    other    things,"    on    the  confirming  the  mortgage,  and  thua 


PLATT   I'.    iNEW    YORK    &    SEA    BEACH    RAILWAY   CO.  85 


PLATT  V.  NEW  YORK  &  SEA  BEACH  RAILWAY  CO. 

Supreme  Court  of  New  York,  Appellate  Divlsion,  Second 

Dept.,  1896 

(9  App.  Div.  87) 

Appeal  by  the  petitioner,  August  Meidling,  as  guardian  ad  litem 
of  August  Meidling,  Jr.,  an  infant,  from  an  order  of  the  Supreme 
Court,  made  at  the  Kings  County  Special  Term  and  entered  in 
the  office  of  the  Clerk  of  the  County  of  Kings  on  the  23d  day  of 
May,  1896,  denying  the  petitioner's  motion  to  vacate  an  order  ap- 
pointing a  receiver  and  also  a  judgment  entered  in  the  action,  or  to 
modify  the  same. 

This  action  was  brought  for  the  purpose  of  foreclosing  a  mort- 
gage executed  bj^  the  New  York  &  Sea  Beach  Railway  Company. 
On  January  11,  1896,  the  plaintiffs  in  this  action  procured  an  order 
appointing  a  receiver  of  said  company,  and  of  all  the  property  then 
owned  by  it.  Subsequently  a  judgment  of  foreclosure  was  en- 
tered by  which  the  receivership  was  continued  and  a  sale  directed 
of  all  the  property  in  the  receiver's  hands.  Thereupon  the  appel- 
lant, who  is  a  judgment  creditor  of  the  New  York  &  Sea  Beach 
Railway  Company,  instituted  this  proceeding  for  the  purpose  of 
having  the  order  appointing  the  receiver  and  the  judgment  of 
foreclosure  and  sale  so  modified  as  to  affect  only  such  property  as 
the  mortgagor  had  when  the  mortgage  was  executed. 

Hatch,  J.  The  validity  of  the  mortgage  is  not  controverted. 
But  it  is  claimed  that  under  it  no  lien  was  acquired  upon  the  per- 
sonal property  purchased  subsequent  to  its  execution,  as  against 
the  petitioner  therein.  That  the  lien  should  attach  to  after-ac- 
quired property  is  within  the  express  terms  of  the  mortgage,  and  it 
is  not  disputed  that  such  is  its  effect  as  between  the  parties  thereto. 

giving  effect  to  all  parts  of  it,   in-  The  matter  is  now  regulated  by 

eluding    the    provision    as    to    after  general    statute    in     Massachusetts 

acquired  machinery  and  cars.     This  (Mass.    Pub.    Stat.,    1882,    Ch.   112, 

mortgage    was    duly    recorded,    and  §  72).      See    Federal    Trust    Co.    v. 

thus,  by  means  of  the  record  and  the  Bridal    County   Street    Rij.    Co.,    222 

statute,  the  lien  thereby  created  was  Mass.  35  (1915).    So  in  several  other 

duly  notified  to  all  persons  having  States     (Conn.     Gen.     Stat.,     1888, 

business  relations  with  the  Vermont  §3572;     Minn.     Gen.     Stat.,     1894. 

and    Massachusetts    Railroad    Com-  §  2724). 
pany." — Per  Dewey,  J. 


86  CONVEYANCE 

By  the  provisions  of  the  statute  (Laws  1850,  c.  140,  §  28,  subd.  10), 
authority  was  confei-red  to  mortgage  the  corporate  property  and 
franchises  for  the  purpose  of  completing,  furnishing  or  operating 
the  railroad.  And  this  authority  has  been  continued  in  the  same 
language  under  the  revision  of  the  railroad  law  (Laws  1892,  c.  676, 
§  4,  subd.  10).  The  statute  contemplates  that  it  may  be  neces- 
sary to  borrow  money  for  the  purpose  of  the  physical  creation  of  the 
road  and  putting  it  in  operation.  It  is  quite  evident  that  in  the 
accomplishment  of  this  purpose  property  would  be  created  and  ac- 
quired that  had  no  actual  or  potential  existence  at  the  time  when 
the  loan  was  made  and  the  mortgage  given.  It  is  the  usual  course 
of  procedure  in  the  construction  of  a  railroad  that  money  is  raised 
by  mortgage  on  its  property,  and  that  the  structure  is  built  and 
operated  to  a  large  extent  by  means  of  the  loans  thus  obtained,  and 
much  of  the  property  is  created  and  acquired  after  the  loan  is  made. 
The  statute  makes  no  distinction  between  property  necessary  for 
the  completion  and  furnishing  of  the  road  and  that  which  is  essen- 
tial to  its  operation.  By  the  terms  of  the  law,  therefore,  it  was 
contemplated  that,  for  the  money  thus  obtained  the  propertj^  ac- 
quired should  be  pledged  as  the  security  for  its  repayment,  and  this 
cannot  be  accomplished  without  holding  that  the  lien  of  the  mort- 
gage attaches  to  such  property  as  shall  be  necessary  for  that  pur- 
pose, whether  it  is  in  existence  at  the  time  when  the  mortgage  is 
given  or  is  subsequently  acquired  and  whether  such  property  be 
such  as  is  denominated  real  or  personal.  So  it  was  early  held  that 
such  a  mortgage  created  in  equity  a  lien  upon  property  subse- 
quently acquired  superior  to  the  lien  of  a  subsequent  incumbrance 
by  mortgage  or  judgment  {Seymour  v.  Canandaigua  &  Niagara 
Falls  R.  R.  Co.,  25  Barb.  284;  Benjamin  v.  Elmira,  Jefferson  & 
Canandaigua  R.  R.  Co.,  49  id.  447;  Stevens  v.  Watson,  4  Abb.  Ct. 
App.  Dec.  302).  In  those  cases  the  question  arose  respecting  liens 
upon  subsequently  acquired  real  property.  But  the  discussion 
shows  that  the  court  considered  the  rule  applicable  as  well  to  per- 
sonal as  to  real  property.  Such  has  been  the  uniform  rule  applied 
in  the  Federal  courts  {Mitchell  v.  Winslow,  2  Story,  630;  Central 
Trust  Co.  V.  Kneeland,  138  U.  S.  419). 

The  difficulties  which  have  arisen  relate  not  so  much  to  the  rec- 
ognition of  the  mortgage  as  a  lien,  for  the  doctrine  of  the  above- 
cited  cases  has  never  been  questioned,  but  rather  to  the  steps  neces- 
sary to  be  taken  to  evidence  the  lien.  The  first  debate  arose  over 
the  question  whether  the  rolling  stock  and  equipment  of  the  road 
retained  its  character  as  personal  property,  and  if  so,  was  it  requi- 


PLATT   V.    NEW   YORK    &    SEA    BREACH    RAILWAY   CO.  87 

site  that  the  mortgage  should  be  filed  as  a  mortgage  of  chattels. 
The  Supreme  Court  divided  upon  the  question,  and  decisions  were 
rendered  both  ways.  The  Court  of  Appeals,  in  Hoyle  v.  Platts- 
burg  &  Montreal  R.  R.  Co.,  54  N.  Y.  314,  settled  the  question  by 
holding  that  it  was  personal  property,^  and  that  the  mortgage 
covering  it  must  be  filed  as  a  mortgage  of  chattels,  as  prescribed 
by  the  act  of  1833,  or  the  same  would  be  void  as  against  the  general 
creditors  of  the  corporation.  To  meet  this  conclusion,  the  Legisla- 
ture, in  1868,  passed  an  act  (Laws  of  1868,  c.  779),  providing  that 
it  shall  not  be  necessary  to  file  such  mortgage,  as  a  mortgage  of 
chattels  when  it  covers  real  and  personal  property  and  is  recorded 
as  a  mortgage  of  real  estate  in  each  county  in  or  through  which 
the  railroad  runs.  By  this  act  the  status  of  such  property,  so  far 
as  it  relates  to  liens  by  way  of  mortgage  is  made  practically  subject 
to  the  same  rules  and  is  placed  upon  the  same  footing  as  real  prop- 
erty. The  business  carried  on  by  railroads,  the  great  extent  of 
territory  which  they  cover,  and  the  fact  that  the  rolling  stock  is  at 
all  times  widely  distributed,  not  only  throughout  the  State  through 
which  its  lines  mainly  run,  but  also  throughout  the  different  States 
of  the  Union,  create  an  essential  difference  between  it  and  property 
whose  situs  is  practically  fixed.  This,  coupled  with  the  necessity 
which  exists  for  certainty  of  securing  to  those  advancing  money, 
usually  in  very  large  amounts,  upon  the  faith  of  railroad  property 
and  the  practical  difficulty,  if  not  impossibility,  of  a  railroad  being 
able  to  realize  upon  its  property  in  this  manner,  if  the  technical 
rules  respecting  liens  upon  personal  property  should  obtain,  evi- 
dently created  an  intent  in  the  mind  of  the  Legislature  to  make 
such  property  subject  to  the  same  rules,  so  far  as  practicable,  as 
apply  to  liens  upon  real  property.  It  is  quite  evident  that  if  it 
should  be  held  necessary  to  constantly  revise  such  a  mortgage,  in 
order  to  cover  what  has  been,  it  may  be,  purchased  by  the  money 
advanced  or  to  supply  operating  needs  and  replenish  what  is  de- 
stroyed, it  would  render  such  security  so  doubtful  and  precarious 
as  not  only  to  impair,  but  to  practically  destroy  its  value.  We 
can  see  no  reason  for  drawing  a  distinction  in  this  regard  between 
real  and  personal  property.  On  the  contrary,  as  the  authority  for 
the  mortgage  of  both  is  derived  from  the  same  source,  and  the  same 
reasons  exist  why  both  should  be  available  and  answerable  as  se- 
curity, we  think  it  more  in  harmony  with  the  legislative  intent  to 
subject  it  to  the  sam.e  rules  {N.  Y.  Securitij  Co.  v.  Saratoga  Gas 
Co.,  88  Hun,  569).  This  view  does  not  bring  us  in  conflict  with 
1  See  Morrill  v.  Noyes,  56  Me.  458  (1863). 


88  CONVEYANCE 

R.  D.  Co.  V.  Rasey,  142  N.  Y.  570.  That  case  proceeded  from  the 
well-settled  legal  rule  that  a  mortgage  of  chattels,  having  no  actual 
or  potential  existence  when  the  mortgage  was  given,  is  void  as  to 
intervening  creditors.  For  reasons  already  stated  that  rule  has  no 
application  to  a  mortgage  of  this  character. 

It  follows  that  the  order  appealed  from  should  be  affirmed.^ 

Order  affirmed. 

1  Affirmed  by  the  Court  of  Appeals,  Saratoga   Gas   &   Elec.   L.    Co.,    15& 

on   opinion   below,    1.53    N.    Y.    670  N.  Y.  137  (1899),  discussing  a  cor- 

(1897).  porate  mortgage  on  future  earnings 

See,  also.  New  York  Security  Co.  v.  and  products. 


CHAPTER   I.     (Continued) 
Section  III. — Informal  Mortgages — Equitable  Liens 

RUSSEL  V.   RUSSEL 

Court  of  Chancery,  1783 

(1  Brown  Ch.  269) 

A  lease  having  been  pledged  by  a  person  (who  afterwards  be- 
came a  bankrupt)  to  the  plaintiff,  as  a  security  for  a  sum  of  money 
lent  to  the  bankrupt,  the  pledgee  brought  this  bill  for  a  sale  of  the 
leasehold  estate. 

Mr.  Lloyd,  for  the  plaintiff,  merely  stated  the  case,  and  that  the 
plaintiff  had  a  lien  upon  the  estate. 

Mr.  Kenyon,  for  the  defendants,  the  assignees,  insisted  the  plain- 


■^x'- 


tiff's  claim  was  against  the  law  of  the  land;  for  that  it  would  ^^4yC)/ -^\ 
charging  land  without  writing,  which  is  against  the  4th  clause  of\ 
the  Statute  of  Frauds. 

Lord  Loughborough.  In  this  case  it  is  a  delivery  of  the  title  to 
the  plaintiff  for  a  valuable  consideration.  The  court  has  nothing 
to  do  but  to  supply  the  legal  formalities.  In  all  these  cases  the 
contract  is  not  to  be  performed,  but  is  executed. 

Lord  Ashurst.  Where  the  contract  is  for  a  sale,  and  is  ad- 
mitted so  to  be,  it  is  an  equivocal  act  to  be  explained,  whether  the 
party  was  admitted  as  tenant  or  as  purchaser.  So  here  it  is  open 
to  explanation,  upon  what  terms  the  lease  was  delivered. 

A  question  arose  as  to  reading  the  bankrupt's  evidence,  he  having 
had  his  allowance  and  certificate,  but  the  Court  suffered  it  to  be 
read,  thinking  him  not  bound  to  refund. 

An  issue  was  directed  to  try  whether  the  lease  was  deposited  as 
a  securitj'^  for  the  sum  advanced  by  the  plaintiff  to  the  bankruj^t. 

Upon  the  trial  the  jury  found  it  was  deposited  as  a  security.^ 

'  "The  case  of  Russel  v.  Riissel  is  and   probability   of   evidence   which 

a  decision  much  to  be  lamented;  that  the  very   object   of   the  Statute  of 

a  mere  deposit  of  deeds  shall  be  con-  Frauds  was  entirely  to  exclude." — 

sidered  as  evidence  of  an  agreement  Eldon,  L.  Ch.,  in  Ex  parte  Haigh, 

to  make  a  mortgage.     That  decision  14  Ves.  402. 

has  led  to  discussion  upon  the  truth  Rockurll  v.   Hohhy,  2  Sandf.   Ch. 

89 


90 


CONVEYANCE 


STODDARD  v.   HART 
Court  of  Appeals  of  New  York,  1861 

(23  N.  Y.  556) 

Appeal  from  Supreme  Court.  The  action  was  to  restrain  the 
»  foreclosure  by  advertisement,  and  to  compel  the  cancellation  of  a 
\  mortgage  held  by  the  appellant  against  one  Spicer.  The  trial  was 
before  a  referee,  who  found  these  facts:  On  the  4th  of  March, 
1852,  Spicer  procured  from  the  defendant,  on  the  security  of  the 
bond  and  mortgage  in  question,  an  advance  of  $200  on  lumber  to 
be  thereafter  furnished.  The  mortgage  was  recorded  on  the  8th 
of  March,  1852. 

The  original  condition  of  the  bond  and  mortgage  was  for  the 
payment  of  $200  and  interest  on  the  15th  of  June,  1852.  At  the 
time  the  .1200  was  advanced,  it  was  agreed  between  the  parties  that 

Iif  Spicer  should  want  more  money,  the  defendant  would  advance 
it,  and  for  the  purpose  of  securing  it,  the  amount  of  such  further 
advance  should  be  inserted  in  the  bond,  with  the  parol  agreement 
that  the  mortgage  should  be  considered  as  security  for  what  was 
thus  inserted.  Accordingly,  within  ten  days  after  the  mortgage 
was  given,  Spicer  applied  for  and  obtained  from  the  defendant  a 
further  advance  of  $180,  inserting  at  the  same  time  in  the  bond  a 
further  condition  for  the  payment  of  that  amount,  with  interest, 


(N.  Y.)  9  (1844);  Hockett  v.  Reynolds, 
4  R.  I.  512  (1857);  Griffi?i  v.  Griffin, 
18  N.  J.  Eq.  104  (1866);  Gale  v.  Mor- 
ris, 29  N.  J.  Eq.  222  (1878),  accord. 
Contra  are  Shitz  v.  Dieffenbnch,  3 
Pa.  St.  233  (1846) ;  Meador  v.  Meador, 
3  Heisk.  (Tenn.)  562  (1871).  The 
ca.ses  in  the  United  States  are  few 
and  it  may  be  doubted  if  the  doctrine 
will  have  much  following  here.  In 
several  Western  States  the  deposit 
of  School  Land  Certificates,  which 
pass  title  by  assignment,  has  been 
held  to  create  an  equitable  lien.  See 
Mowry  v.  Wood,  12  Wis.  413  (1860); 
Jarvis  v.  Butcher,  16  Wis.  307  (1862). 
In  Ex  parte  Kensington,  2  V.  &  B. 
79  (1813),  the  original  equitable 
mortgage  arising  from  the  deposit  of 


title  deeds  as  security  was  allowed  by 
Lord  Eldon  to  be  enlarged  in  amount 
by  subsequent  oral  agreement  with- 
out the  return  and  re-deposit  of  the 
title  deeds.  This  was,  of  course,  an 
extension  of  the  anomalous  holding 
of  the  principal  case. 

In  Ex  parte  Hooper,  1  Meriv.  7 
(1815),  the  legal  estate  was  assigned 
by  way  of  mortgage,  and  Lord 
Eldon  held  that  the  legal  mortgagee 
with  title  in  himself  could  not  en- 
large the  amount  by  subsequent 
parol  agreement.  Lord  Eldon  took 
occasion  to  state  that  "the  cases  on 
this  subject  have  gone  too  far  already, 
and  I  would  be  understood  as  saying 
that  I  will  not  add  to  their  author- 
ity." 


STODDARD    V.    HART  91 

on  the  1st  of  June,  1852.  The  mortgage,  which  had  been  in  the 
meantime  recorded,  was  conditioned  for  the  payment  of  S200  and 
interest,  with  the  additional  clause:  "According  to  the  condition 
of  a  certain  bond  obligatory  bearing  even  date  herewith." 

On  the  12th  of  July  following,  Spicer  was  indebted  to  the  re- 
spondent, Stoddard,  in  the  sum  of  $500,  for  rent  due  and  to  become 
due,  and  with  full  and  specific  information  from  Spicer  of  all  the 
foregoing  facts,  Stoddard  took  a  subsequent  mortgage  on  the 
premises  for  the  amount  of  his  debt;  and  afterwards,  in  Janu- 
ary, 1853,  he  obtained  from  Spicer  a  deed  of  the  property,  which 
was  received  in  satisfaction  of  his  mortgage. 

On  the  25th  of  February,  1853,  the  defendant  commenced  a 
foreclosure  by  advertisement,  claiming  the  amount  due  to  be  $380, 
with  interest.  The  plaintiff,  on  the  1st  of  March,  tendered  as  the 
amount  due,  the  sum  of  $200,  with  interest  and  costs,  and  de- 
manded a  satisfaction  piece,  which  the  defendant  refused.  The 
referee  decided  that  the  defendant  had  no  lien  on  the  premises 
except  for  the  $200  and  interest,  and  that  the  mortgage  should  be 
cancelled  on  payment  of  that  amount,  with  costs. 

The  judgment  entered  upon  the  referee's  report  was  affirmed  on 
appeal  at  general  term  in  the  Eighth  District,  and  the  defendant 
appealed  to  this  court. 

CoMSTOCK,  Ch.  J.  In  a  loose  and  general  sense  the  equity  of  this 
case  is  on  the  side  of  the  defendant,  because  he  made  the  subse- 
quent advance  of  $180,  it  being  agreed  that  this,  as  well  as  the 
original  sum  of  $200,  should  be  considered  as  secured  by  the  mort- 
gage. The  question,  however,  is,  whether  the  rules  of  law  will  give 
that  effect  to  the  transaction. 

It  will  be  convenient  first  to  determine  the  legal  construction 
and  effect  of  the  mortgage,  unaided  by  the  parol  facts,  but  read  in 
connection  with  the  bond  to  which  it  is  collateral.  On  the  part  of 
the  defendant  it  is  contended  that  the  two  instruments,  consti- 
tuting, as  they  do,  a  single  security,  are  to  be  read  as  one;  and, 
therefore,  that  the  new  advance,  being  written  in  the  condition  of 
the  bond,  is  it  to  be  deemed  actually  incorporated  in  the  condi- 
tion of  the  mortgage  also,  so  as  to  render  the  latter  a  legal  security 
for  both  the  sums  in  question.  This  proposition  does  not  require, 
nor  does  it  admit,  any  aid  from  the  understanding  of  the  parties 
derived  from  the  extrinsic  evidence.  If  it  be  a  sound  one,  it  is 
universally  sound;  so  that,  if  a  bond  be  given  for  $2000  actually 
loaned,  and  a  mortgage  collateral  thereto  be  given  for  $1000,  the 


92  CONVEYANCE 

latter  is  always  to  be  read  and  construed  as  a  security  for  the  larger 
sum.  The  instrument  being  legally  perfect,  there  is  no  occasion 
to  reform  it,  or  to  involve  the  doctrine  of  equitable  Hen,  or  specific 
performance,  or  any  kindred  doctrine  of  equity. 

I  think  this  proposition  cannot  be  maintained.  A  bond  and 
mortgage  are  two  instruments,  although  one  may  be  collateral  to 
the  other.  The  one  is  a  personal  obligation  for  the  debt;  the 
other  creates  a  lien  upon  land  for  the  security  of  that  debt,  and  it 
may  well  be  for  a  portion  of  the  debt  instead  of  the  whole.  If  the 
personal  obligation  expresses  two  sums,  and  the  collateral  instru- 
ment expresses  only  one  of  them,  I  see  no  reason  why  each  should 
not  be  construed  according  to  its  own  terms.  So,  if  the  condition 
of  a  bond  be  for  a  larger,  and  that  of  the  mortgage  be  for  a  smaller 
sum,  the  obvious  effect  of  both  the  instruments  is  that  the  maker 
binds  himself  generally  for  the  whole  debt,  while  he  speciall}^ 
pledges  the  mortgaged  land  for  only  a  given  part  of  it.  In  this 
case  the  written  condition  of  the  bond  is  to  pay  the  $200,  and  the 
further  sum  of  $180;  while  that  of  the  mortgage  is  only  to  pay 
the  $200.  Each  instrument  is  perfect,  and  each  admits  of  a  plain 
construction  and  effect  according  to  its  own  language.  If  we  do 
not  look  outside  of  them,  there  is  no  ambiguity.  A  debt  was  cre- 
ated, consisting  of  two  sums.  The  land  was  mortgaged  for  one 
of  those  sums  only. 

In  the  next  place,  if  the  doctrine  were  admitted  that  a  mortgage 
passes  the  freehold  or  legal  estate  in  lands,  it  would  probably  fol- 
low that  a  parol  agreement  that  the  security  should  stand  for  a 
new  advance  would  be  good  against  the  mortgagor  or  any  one 
claiming  under  him  not  having  the  rights  of  bona  fide  purchasers. 
The  title  being  conveyed  by  the  instrument,  the  equities  of  the 
parties  might  be  adjusted  or  modified  by  any  new  agreement  with- 
out a  writing.  But  it  is  entirely  settled  with  us  that  such  is  not 
the  nature  or  effect  of  a  mortgage.  With  us  a  mortgage  is  a  lien 
or  security  only,  and  not  in  any  sense  a  title  (Kortright  v.  Cady, 
21  N.  Y.  343,  and  cases  cited).  This  ground  of  sustaining  the  de- 
fendant's lien  for  the  additional  advance,  therefore,  cannot  be 
maintained.  The  defendant  has  no  title  to  the  land  in  question; 
and  we  have  already  seen  that  he  has  no  legal  mortgage  for  a 
greater  sum  than  $200. 

.  At  the  commencement  of  this  suit  the  defendant  was  proceed- 
ing to  foreclose  his  mortgage,  by  advertising  to  sell  the  premises 
under  the  power  of  sale  contained  in  the  instrument;  and  he 
claimed  in  his  notice  both  the  sums  of  money  in  question.    The 


STODDARD    V.    HART 


93 


plaintiff,  before  instituting  the  suit,  tendered  the  sum  of  $200  se- 
cured by  the  mortgage,  according  to  its  terms,  with  the  interest, 
and  the  costs  which  had  accrued.  From  what  has  been  said,  it 
follows  that  this  tender  extinguished  the  lien  and  the  power  of 
sale,  and  that  a  sale  afterwards  made  under  the  power  would  be  a 
nullity  (Kortright  v.  Cady,  supra).  Of  course,  we  now  speak  of 
the  lien  as  a  legal  one,  expressed  in  the  mortgage,  and  having  no 
other  existence. 

It  is  claimed,  however,  that  the  defendant  acquired  some  equi- 
table lien  or  right  to  charge  the  new  advance  upon  the  land,  and 
that,  although  such  a  lien  or  right  cannot  be  enforced  in  the  man- 
ner attempted,  because  there  is  no  legal  power  of  sale  to  enforce  it, 
yet,  as  the  plaintiff  asks  the  interference  of  a  court  of  equity,  he 
must  do  all  that  equity  requires  as  the  condition  of  relief;  in  other 
words,  he  must  offer  to  pay  the  whole  debt  in  specie  to  the  plaintiff. 
The  argument  may  be  sound  if  the  defendant  did  acquu-e  any  such 
equitable  title  or  right;  and  this  is  the  next  subject  of  inquiry. 

In  England  it  has  long  been  held  that  a  deposit  of  title  deeds 
by  a  debtor  with  his  creditor  is  evidence  of  a  valid  agreement  to 
give  a  mortgage,  which  agreement  is  enforced  by  treating  the 
transaction  as  an  equitable  mortgage.    It  has  always  been  admit- 
ted by  English  jurists  that  this  doctrine  contravenes  the  statute  of 
frauds,  although  it  has  become  well  settled  in  the  jurisprudence  of 
that  country  (4  Kent,  Com.  151).     It  is  confined  there  to  the 
precise  case  of  a  deposit  of  title  deeds.    A  mere  parol  agreement 
to  make  a  mortgage,  or  to  deposit  deeds,  does  not  create  an  equita- 
ble lien.    In  this  State  the  doctrine  is  almost  unknown,  because  we 
have  no  practice  of  creating  liens  in  this  manner.     F.gnitv^  how- 
ever,  here  as  well  as  there,  does  sometimes  spedfically  enforce 
""pnrnMfrrrmrnt"  y^^^"*-  "^^  Tir,fh,w  Tha  gT^j,^^f^  f»rfraiiH>;-  anc]  T 
see  no  reason  to  doubt  that  such  an  agreement  to  make  a  mortgage 
may  be  enforced  when  money  or  value  has  been  parted  with  on  the 
faith  of  it,  and  the  circumstances  are  such  as  to  render  it  inequita- 
ble to  refuse  the  reUef.    But,  in  the  present  case,  the  precise  diffi- 
culty is  in  the  absence  of  any  such  agreement.    The  defendant  had 
loaned  S200,  and  held  a  mortgage  for  that  amount.    He  then  ad- 
vanced another  sum:  but  there  was  no  agreement  to  make  another 
mortgage,  or  to  change,  in  any  respect,  the  terms  of  the  one  already 
made.     The  additional  sum  was  inserted  in  the  bond,  with  an 
understanding  thereby  that  the  mortgage  should  be  "considered" 
as  a  security  for  that  sum  also.    The  instrument,  as  it  was  made, 
was  a  plain  security  for  $200;  and  no  change  in  its  terms  was  con- 


? 


94  CONVEYANCE 

templated.  Nor  is  there  the  least  pretence  that  any  writing 
was  to  be  executed  creating  a  special  security  for  the  new  advance. 
Now,  a  loan  of  money,  with  a  mere  understanding  that  the  land  of 
the  borrower  is  a  security  for  the  debt,  does  not  create  a  mortgage, 
legal  or  equitable.  If  it  be  specifically  agreed  to  execute  a  legal 
mortgage,  a  very  different  question  arises.  The  deposit  of  title 
deeds  is  evidence  of  such  an  agreement.  But  here  there  was  no 
agreement  to  do  anything  which  was  not  actually  done.  Conse- 
quently, if  enough  was  not  done  to  create  a  mortgage,  then  none 
was  created.  There  is  no  room  for  the  doctrine  of  specific  perform- 
ance, because  there  is  nothing  unperformed.  The  parties  may 
have  misunderstood  the  effect  of  what  they  did;  but  nothing  in  the 
transaction  was  left  unfinished  of  which  equity  can  now  decree  the, 
complete  execution.  The  question,  then,  is  upon  the  legal  inter- 
pretation and  effect  of  the  acts  done,  which,  as  we  have  seen,  failed 
to  create  a  lien.  The  understanding  and  belief  of  the  parties  do 
not  change  the  law. 

For  analogous  reasons  I  do  not  see  that  the  defendant  can  de- 
rive any  aid  from  the  doctrine  of  reforming  contracts  in  equity. 
(If  a  writing  does  not  truly  express  the  agreement  of  the  parties; 
if  anything  was  omitted  which  was  agreed  to  be  inserted;  or  if 
anything  be  inserted  contrary  to  their  intention,  equity  will  re- 
lieve against  the  mistake  by  reforming  the  contract.    But  in  this 

I  case  no  mistake  is  alleged  or  proved.     Everj-thing  agreed  upon 
I  was  done.    The  subsequent  advance  of  money  was  to  be  inserted 
'in  the  condition  of  the  bond,  and  it  was  inserted  accordingly. 
.There  was  no  agreement  to  make  a  new  mortgage,  or  to  change 
the  terms  of  the  existing.    It  is  said  the  understanding  of  the  par- 
Hies  was  that  the  mortgage  should  secure  this  advance  also;  but 
it  is  not  pretended  that  this  understanding  was  to  be  expressed 
in  any  form  of  writing.    If  A.  should  loan  money  to  B.,  and  take 
a  bond  with  the  understanding  that  the  farm  of  the  latter  should 
be  considered  a  security,  but  with  no  intention  or  agreement  to 

I  make  a  mortgage  or  writing  of  any  sort,  as  the  law  requires,  in 
order  to  create  a  lien,  none  would  be  created  at  law  or  in  equity. 
The  transaction,  in  judgment  of  law,  would  amount  simply  to  a 
loan  upon  the  bond  of  the  borrower.  Such,  I  think,  in  substance, 
was  the  transaction  in  question.  There  was  no  mistake,  unless  it 
be  in  misunderstanding  the  legal  effect  of  what  was  said  and  done. 
But  even  this  is  not  alleged.  It  is  not  stated  or  proved  that  the 
parties  believed  or  understood  that  the  insertion  of  the  new  loan 
in  the  bond  had  the  effect  in  law  of  enlarging  the  mortgage  also. 


STODDARD    V.    HART  95 

Will  a  court  of  equity,  then,  make  a  new  contract  for  parties  in 
order  to  effectuate  a  mere  understanding  where  no  agreement  is 
pretended  different  from  the  one  which  the  writing  already  ex- 
presses, and  where  there  are  no  circumstances  of  surprise,  imposi- 
tion, fraud  or  misplaced  confidence?  To  do  so,  I  think,  would  be 
taking  a  step  in  advance  of  the  settled  rule  on  the  subject,  es- 
pecially if  the  relief  sought  be  in  direct  opposition  to  the  statute 
of  frauds.  In  the  case  of  Hunt  v.  Rousmaniere's  Executors,  1 
Peters,  1,  the  general  intention  of  the  parties  was  to  effect  a  se- 
curity upon  a  ship  at  sea  equivalent  to  a  mortgage  or  bill  of  sale. 
With  that  design,  a  power  of  attorney  to  sell  was  executed,  which, 
as  they  understood  and  were  advised,  accomplished  the  object  in 
view.  As  a  power  merely,  the  instrument  was  revoked  by  the 
death  of  the  party  who  signed  it,  and  a  bill  was  filed  to  reform  the 
writing  so  that  it  might  stand  as  a  security  according  to  the  in- 
tention. It_was  ad judged^_in  Jhe  Supreme  Court  of  the  United 
States,  upon  tjie  fnllpst  consideration,  that-t]i£_bilJ„couId  not  be_ 
mamtamed — the  ground  of  decisioa_being  that  the  court  could  not_ 
make  an  ap!:rgoment  of  a  different  tenor  and  effect  from  the  on? 
which  theparties  themselves  had  intentionally  entered  into.  The 
case  before  us  seems  to  me  still  weaker  in  its  circumstances,  be- 
cause not  only  was  there  no  agreement  for  a  better  security  than 
the  defendant  actually  received,  but  it  does  not  even  appear  that 
he  acted  under  any  mistake  as  to  the  legal  effect  of  the  transaction. 
The  new  advance  of  money  was  inserted  in  the  bond ;  but  there  is 
no  pretence  of  a  belief  that  this  in  any  respect  affected  the  mort- 
gage. There  was  a  parol  agreement  that  the  mortgage  should  be 
considered  as  a  security  also  for  the  sum  thus  inserted.  The  other 
party  might  give  effect  to  this  agreement  in  any  suit  or  proceed- 
ing against  him  to  foreclose,  if  he  voluntarily  chose  to  do  so. 
But  it  is  not  alleged  that,  under  a  mistake  even  of  the  law,  this 
agreement  was  supposed  to  be  of  any  binding  force  or  effect- 
On  the  whole,  I  am  of  opinion  that  the  defendant's  lien,  whetheri 
viewed  at  law  or  equity,  was  only  for  the  original  sum  of  $200,1 
and,  consequently,  that  the  judgment  of  the  court  below  is  right.  1 

Davies  and  Mason,  JJ.,  dissented;  Hoyt,  J.,  did  not  sit  in  the 
case. 

Judgment  affirmed} 

1  Where  the  extension  of  the  mort-      Butts    v.    Broughton,    72    Ala.    294 
gage    security    is    in    writing,    see       (1882). 


?h 


96  CONVEYANCE 

BOGERT  V.   BLLSS  AND  ROBERT 

Court  of  Appeals  of  New  York,  1896 

(148  A^  Y.  194) 

Appkat.  frojxuorder  of  the  General  Term  of  the  Court  of  Common 
Pleas  for  the  city  and  county  of  New  York,  made  June  3,  1895, 
which  reversed ^juugrder  of  Special  Term  confirmjiig^  the  report 
of  a  referee  in  proceedings  forthe  distribution  of  surplus  moneys 
arising  from^tliej^alel^fTnortgagecl  proiiif^^s  m  smraction  of  fore- 
closure^ modified-an4-eoiifij:med  as  modified  satd  report,  b}'  finding 
that  the^uities-of-the.cJaiDiant^i^ss  wctc  -upciior  to  those  of 
the  cIaima»t4li3bert-^4hat4iieJien  of  the  (I'mmI  oi'  mortgage  to  the 
'claimant  BKss  was  supjiJQiLlo -an.y  (.laim  oi  jlii'iiiiii'^^Q'i^tTlobert, 
and  that_Lbe-defeB4aft^Blis&  was  eH4itl£d  to  pavment  out  of  the 
surplus  moneys,  the  hshknoo,  if  any,  tn  htL,£aid_to  the  defendant 
Robert. 
The  facts,  so  far  as  material,  are  stated  in  the  opinion. 

Andrews,  Ch.  J.  The  controversy  relates  to  the  disposition  of 
surplus  moneys  arising  on  a  foreclosure  of  a  mortgage.  One 
Robert  claims  a  prior  lien  thereon  as  assignee  of  a  mortgage  made 
by  the  defendant  Striker  to  one  Weil,  dated  May  15,  1891,  paya})le 
June  18,  1831,  for  $1000,  recorded  May  18,  1891.  The  mortgage 
was  paid  at  maturity  by  Striker,  the  mortgagor  and  owner  of  the 
equity  of  redemption,  to  Weil,  the  mortgagee,  who  on  the  same  day 
executed  and  delivered  to  Striker  a  satisfaction  of  the  mortgage, 
together  with  the  bond,  but  the  mortgage  was  then  in  the  register's 
office  and  for  that  reason  was  not  delivered  to  Striker.  The  mort- 
gage was  paid  in  usual  course,  and  at  the  time  of  the  payment  there 
was,  so  far  as  appears,  no  intention  on  the  part  of  Striker,  and  no 
understanding  between  him  and  the  mortgagee,  that  the  mortgage 
should  be  kept  alive.  Subsequently,  on  July  2d,  1891,  Striker 
applied  to  Robert  (a  partner  of  Weil)  for  a  loan  of  $1000,  on  the 
security  of  this  extinguished  mortgage,  and  the  loan  was  made, 
Striker  delivering  to  Robert  at  the  time  the  bond  and  the  satisfac- 
tion, and  stating  that  Weil  would  assign  the  mortgage  to  him. 
The  assignment  was  subsequently  made,  but  not  as  we  infer  until 
after  the  mortgage  executed  to  Bliss,  the  other  claimant  of  the  sur- 
plus. The  Bliss  mortgage  was  executed  by  Striker  to  Bliss  August 
28th,  1891,  and  covered  the  same  premises  embraced  in  the  Weil 


BOGERT    V.    BLISS   AND    ROBERT  97 

mortgage,  and  was  given  to  secure  a  loan  of  $1500  made  by  Bliss 
to  Striker,  but  in  form  was  an  absolute  deed,  and  was  recorded 
November  11th,  1891.  Bliss  when  he  took  his  mortgage  made  no 
.search  of  the  title  and  had  constructive  notice  only  of  the  Weil 
mortgage.  The  question  is  whether  Robert  or  Bliss  is  entitled  to 
the  surplus  moneys.  We  think  the  conclusion  of  the  General  Term  I 
that  Bliss  is  entitled  to  them  is  correct. 

The  Weil  mortgage  was  extinguished  by  pa\iiient  before  Striker 
applied  to  Robert  for  a  loan,  and  Robert  had  notice  that  the  mort- 
gage had  been  paid  by  Striker.  Striker  delivered  to  him  the  satis- 
faction executed  by  Weil,  and  there  is  no  pretence  that  it  did  not 
represent  the  actual  fact  that  Striker  had  paid  the  mortgage. 
What  Striker  undertook  to  do  was  to  re-issue  the  mortgage  and  the 
bond  to  secure  another  loan  equal  to  the  amount  of  the  mortgage. 
Robert  assented  to  this  proposition  and  made  the  loan  on  the  faith 
of  the  proposed  security.  But  there  was  no  writing  and  no  actual 
assignment  of  the  mortgage  uqtil  after  Bliss  had  taken  his  mort- 
gage. All  that  Robert  had  until  the  assignment  was  made  was  the 
possession  of  the  bond  and  the  satisfaction  of  the  mortgage  and 
the  verbal  agreement  of  Striker  that  the  mortgage  should  be  as- 
signed. 

Jn  this  State  a  mortgagejs-a  lien  suggly,  and  the  general  prin- 
ciple.js-woll  cottiedlthat  on  pavment  theIfeTr4s~tmo^c^o  dis- 
charged and_theiiiortgage2^tiT^g^^Hl^'^  There  are  many  cases 
where,  for  purposes  connected  with  the  protection  of  the  title  or  the 
•enforcement  of  equities,  what  is  in  form  a  payment  of  a  mortgage, 
will  be  treated  as  a  purchase,  so  as  to  preserve  rights  which  might 
be  jeoparded  if  the  transaction  was  treated  as  a  pajanent.  But 
we  know  of  no  principle  which  permits  a  mortgagor  who  has  paid 
his  mortgage  and  taken  a  satisfaction,  there  being  at  the  time  no 
equitable  reason  for  keeping  it  afoot,  subsequently  to  resuscitate 
and  re-issue  it  as  security  for  a  new  loan  or  transaction  and  es- 
pecially where  the  rights  of  third  parties  are  in  question.  It  would 
make  no  difference  in  our  view  whether  the  re-issue  of  the  mort- 
gage was  before  or  after  new  rights  and  interests  had  intervened. 
We  do  not  speak  of  the  position  of  a  subsequent  grantee  or  mort- 
gagee having  actual  notice  of  the  re-issue  of  a  satisfied  mortgage 
before  he  takes  his  mortgage  or  deed.  It  is  possible  that  the  cir- 
<3umstances  of  the  re-issue  may  be  such  as  to  furnish  ground  for  a 
court  of  equity  to  intervene  and  compel  the  execution  of  a  new 
Tnortgage,  to  accomplish  the  real  purpose  of  the  parties,  and  no- 
tice of  such  circumstances  to  the  subsequent  grantee  or  mortgagee 


98  CONVEYANCE 

might,  perhaps,  under  special  conditions,  subject  his  right  to  the 
prior  equity.  But  the  contention  that  a  person  having  at  the 
j  time  notice  that  a  mortgage  had  been  paid  by  the  mortgagor  in 
I  usual  course,  can,  by  a  verbal  arrangement  between  himself  and 
\  the  mortgagor,  give  the  extinct  mortgage  vitality  again  as  security 
\  for  a  new  loan,  so  as  to  give  it  priority  over  a  subsequent  con- 
\veyance  or  mortgage  is  not  justified  by  the  authorities  in  this 

\  state. 

1  The  Statute  of  Frauds  does  not  permit  mortgages  on  land  to  be 
treated  without  writing.  The  re-issue  of  a  dead  mortgage,  if 
Iffect  is  given  to  the  transaction,  is  in  substance  the  citation  of  a 
new  mortgage.  If  this  was  permitted  it  would  furnish  an  easy 
way  to  evade  the  statute.  The  law  wisely  requires  that  instru- 
ments by  which  land  is  conveyed  or  mortgaged  should  be  executed 
with  solemn  forms,  and  that  their  existence  should  be  made  known 
through  a  system  of  registry  so  as  to  protect  those  subsequently 
dealing  with  the  premises.  Public  policy  requires  that  dealings 
with  land  should  be  certain,  and  that  transactions  affecting  the 
title  should  be  open,  and  that  secret  agreements  should  not  be 
permitted  by  which  third  persons  may  be  misled  or  deceived.  It 
would  be  a  convenient  cloak  for  fraud  if  a  mortgagor,  having  paid  a 
mortgage,  could  retain  it  in  his  possession  uncancelled  of  record 
and  reissue  it  at  pleasure.  A  party  taking  from  a  mortgagor  a 
re-issued  mortgage  has  notice  which  should  put  him  upon  inquiry, 
and  he  takes  at  the  peril  that  it  has  in  fact  been  paid. 
'  In  the  present  case,  not  only  had  the  mortgage  been  paid  before 
Robert  made  his  loan,  but  he  knew  the  fact  from  incontestable 
evidence.  If  he  had  received  an  actual  assignment  before  Bliss 
had  taken  his  mortgage,  he  would  not,  we  think,  have  been  entitled 
to  preference.  Upon  the  facts  actually  existing  he  had  merely  an 
agreement  for  an  assignment,  which  at  most  created  an  equity  en- 
forceable by  equitable  action,  and  meanwhile  Bliss  had  obtained  a 
legal  mortgage,  having  no  notice  of  the  agreement.  Bliss  had  con- 
structive notice  of  the  mortgage  to  Weil.  His  mortgage  was  sub- 
ject to  that  incumbrance  unless  the  mortgage  had  been  paid.  But 
he  did  not  take  subject  to  an  arrangement  between  Striker  and 
Robert  to  revive  the  mortgage,  the  lien  of  which  had  been  extin- 
guished by  payment.  The  case  of  Mead  v.  York,  6  N.  Y.  449,  is 
a  direct  authority  upon  the  question  here  presented.  It  was  there 
held  that  a  mortgage  after  being  once  paid  by  the  mortgagor  can- 
not be  kept  alive  by  a  parol  agreement  as  security  for  a  new  liabil- 
ity incurred  for  the  mortgagor  as  against  the  latter's  subsequent 


CHASE    V.    PECK  99 

judgment  creditors.    (See,  also,  Cameron  v.  Irwin,  5  Hill,  272 ;  Jones 
on  Mortgages,  §  943  and  cases  cited.)  .  .  . 

We  find  no  case  which  sustains  the  claim  that  a  mortgage  paid 
by  the  mortgagor,  not  intended  to  be  kept  alive  at  the  time  of  the 
payment,  can  be  thereafter  re-issued  by  him  to  secure  another 
loan,  made  by  a  party  cognizant  of  the  fact,  so  as  to  give  it  vahdity 
as  against  a  subsequent  purchaser  or  mortgagee.^ 

The  order  of  the  General  Term  should  be  affirmed. 

All  concur,  except  Vann,  J.,  not  sitting. 

Order  affirmed. 

CHASE  V.   PECK 
Court  of  Appeals  of  New  York,  1860 

(21  N.  Y.  581) 

Appeal  from  the  Supreme  Court.  Ejectment  for  one  hundred 
acres  of  land  in  Otsego  County.  The  plaintiff  made  title  under  a- 
sheriff's  sale,  made  June  12th,  1849,  upon  execution  on  a  judgment 
against  Alonzo  Aylesworth,  which  became  a  lien  on  the  land  in 
question  on  the  31st  of  May,  1848.  On  the  trial  it  was  proved  that 
Alonzo  Aylesworth  acquired  title  to  the  land  by  deed,  from  Isaac 
Howland  and  Sarah  his  wife,  dated  August  11,  1843.  On  that  day 
they,  being  very  aged  persons,  conveyed  the  land  to  Aylesworth 
(who  was  their  grandson)  for  the  nominal  consideration  of  one 
dollar.  Nothing  was  paid  in  fact,  but  contemporaneously  with  the 
execution  of  the  deed,  Aylesworth  gave  back  a  writing  not  under 
seal,  by  which  he  certified  that  "the  said  Alonzo  hereby  pledges 
the  entire  use  of  the  farm,  this  day  conveyed  to  him,  for  the 
support  of  said  Isaac  and  Sarah,  and  agrees  to  furnish  all  neces- 
sary support — such  as  victuals,  clothing,  medical  aid,  and  all  other 
necessary  comforts  of  life — for  both  the  said  Isaac  and  Sarah;  and 
agrees  and  binds  himself  to  treat  them  kindly  and  wait  upon  them 
attentively  and  in  a  careful  manner,  during  their  natural  lives  and 
during  the  life  of  the  longest  liver  of  them,  and  should  the  produce 
of  the  farm  be  insufficient  for  that  purpose,  then  the  entire  fee  shall 
be  appropriated  for  that  purpose." 

Aylesworth  had  been  brought  up  by  the  Howlands,  and  was  in 
his  minority  at  the  date  of  the  above  conveyance  and  agreement. 

^  On  revival  of  extinct  mortgage      by  writing,  see  Peckham  v.  Haddock, 

36  111.  39  (1864). 


100  CONVEYANCE 

Tlie}^  lived  together  upon  the  farm,  Aylesworth  managing  it  and 
providing  for  the  support  of  his  grandparents  until  after  the  death 
of  Isaac  Rowland,  in  1846.  He  then  became  involved  in  debt,  and 
on  the  29th  of  May,  1848,  being  insolvent,  and  several  suits  against 
him  proceeding  to  judgment,  he  reconveyed  the  premises  to  Sarah 
Rowland.  No  other  consideration  for  the  reconveyance  was  shown 
than  that  to  be  implied  from  the  agreement  of  Aylesworth  to  sup- 
port Mrs.  Rowland  and  his  inability  to  perform  it.  The  plaintiff 
claimed  that  the  reconveyance  was  in  fraud  of  creditors,  and  there 
was  evidence  warranting  the  jury  in  finding  that  an  actual  fraudu- 
lent intention  to  keep  the  property  from  the  reach  of  creditors  was 
a  leading  motive  for  the  reconveyance.  Mrs.  Rowland  lived  upon 
the  proceeds  of  the  farm,  a  fair  rent  for  which  was  shown  to  be 
some  .$60  per  annum,  until  she  sold  it  in  1849  to  a  grantor  of  the 
defendant;  neither  Aylesworth,  nor  any  person  in  his  behalf  pay- 
ing anjihing,  or  rendering  any  service  toward  her  maintenance. 
She  died  after  the  commencement  of  this  suit  and  before  the  trial. 
The  jury  found  a  verdict  for  the  plaintiff,  and  the  judgment  thereon 
was  affirmed  at  general  term  in  the  sixth  district.  The  defend- 
ant appealed  to  this  court,  where  the  case  was  submitted  on 
printed  arguments. 

Denio,  J.  The  determination  of  this  case  will  depend  upon  the 
character  of,  and  the  effect  to  be  attributed  to,  the  instrument 
executed  by  Alonzo  Aylesworth  to  Isaac  and  Sarah  Rowland,  at 
the  same  time  that  the  latter  conveyed  to  him  the  premises  in  con- 
troversy. From  the  two  papers,  taken  together,  it  is  apparent  that 
it  was  parcel  of  the  consideration,  upon  which  the  conveyance  was 
executed,  that  Aylesworth,  the  grantee,  should  support  the  grant- 
ors during  their  joint  and  several  lives.  The  paper  signed  by  him 
professes,  in  the  first  place,  to  pledge  the  entire  use  of  the  farm  for 
that  purpose;  and  it  is  added  that,  if  its  produce  shall  be  insufficient 
for  the  object,  the  entire  fee  shall  be  appropriated  to  accomplish  it. 
It  was,  probably,  intended  that  the  transaction  should  operate,  to 
a  certain  extent,  as  a  gift;  but  this  was  only  so  far  as  the  value  of 
the  pi  operty  conveyed  should  exceed  the  value  of  the  return  which 
was  to  be  made  for  it.  As  respected  the  latter,  the  arrangement 
was  a  contract,  which  imposed  a  certain  duty  upon  the  grantee,  to 
be  performed  for  the  benefit  of  the  grantors,  and  which,  moreover, 
attempted  to  create  a  lien  upon  the  subject  of  the  conveyance,  to 
secure  the  performance  of  the  duty  undertaken  by  the  grantee. 
The  intention  of  the  parties  is  plain;  but  the  question  to  be  con- 


CHASE    V.    PECK 


101 


sidered  Ls.  in  what  legal  or  equitable  light  the  arrangeinontJs_to^ 
be  regardsdjr^  the  eoui;t.  In  our  opinion,  the  instrument  signed 
by  Aylesworth  is  to  be  considerecTas  creating  anequitaBteliicum- 
braJTce  in  the'nature  of  a  mortgage. 

I^yTTiTnaAv  ot  Kn^and,  as  adniTnistered  in  the  Court  of  Chan- 
cery, an  equitaljle  mortgage  may  be  created  by  any  writing  from 
^yl2ip]2j"hA  I'ntr^ntjon  to  crcatc  it  may  be  showrij_or  it  may  be  erfected 
"ByXsimple  deposit  oi'  title  deeds  without  writing.^    It  will  also  be 

"allowed  in  favor  oi  a  vendor,  tor  unpaid  purchasernoney,  or  of  a 
purchaser  who  has  advanced  his  money  on  the  faith  of  a  contract 
for  a  conveyance  (Miller  on  Equitable  Mortgages,  pp.  1,  2,  218, 
and  cases  cited). 

The  courts  ofequityin  this  State  have  adopted  the  general  doc- 
trines of  the  English  Chancery  upon  this  subject,  as  upoiTmanj^ 
others.    Thecases  of  a  mortgage  cre"ated  by"  a  writing  not  sutticient 
in  pn^^vP3H^}^P  prpmisps,  nr  hv  a  depositjTfJrtle  deeds,  TTave  not  l^geiP 
frequent  witK^us;  burtiie-Ttoctrme  hasljeen  applied  in  a  few  in- 
^anpps   a^  I  Ho  not  find  any  jiirT^ment  or  dictum  by  which  it  has~^ 

'"  eve'-  bppp  questioned.  In  Jackson  v.  Dunlap^  \  John.  Ca.  ii4,  a^ 
vendor  of  land  had  executed  and  acknowledged  a  conveyance  to  the 
vendee,  but  a  part  of  the  purchase  money  had  not  been  paid,  and 
it  was  then  agreed  that  the  grantor  should  retain  the  deed  until 
the  balance  should  be  actually  paid.  It  was  equivocal  upon  the 
testimony  whether  the  deed  had  been  delivered  so  as  to  pass  the 
title  or  not.  If  it  had  not  been,  the  question  we  are  considering 
would  not  arise;  but  Kent,  Ch.  J.,  considered  the  delivery  com- 
plete, and  that  the  deed  was  then  retained  by  the  grantor  by  way 
of  security,  till  payment.  This,  he  said,  was  the  creation  of  an 
equitable  lien  in  the  grantee.  The  other  judges  seem  to  have  been 
of  opinion  that  the  title  did  not  pass.  In  Jackson  v.  Parkhurst,  4 
Wend.  369,  it  was  held  by  the  court.  Judge  Sutherland  giving  the 
opinion,  th^.t  t^p  plpdp-e  or  deposit  of  a  deed  with  the  grantor,  bi_ 
wav  of  security,  would  give  him  a  lien  in  the  nature  of  a  mortgage;,^ 
JTut  the  case  being"at  law,  it  was  Held  that  such  aTiTle^ould"not  be 

In  ThI'  Matter  of  Howe  and  Wife, 


set  u^against  the  legal  estate.^ 
1  Paige.  l2o.  the  Kngbeh-duLUiiie,  that  nil  agl'Stro^^tlfgr  a  mgrt:; 
gage  is  in  equity  a  specific  lien  on  the  land,  was  asserted  aiidjj^; 
lied  bv  ChanppHnr  WalworthT 
The  cases  in  which  a  lien  for  the  purchase  money  has  been  estab- 


1  Thi.s  language  was  applied  by  the 
court  in  Allis  v.  Jones,  45  Fed.  150 
(1891),  where  the  corporate  seal  on  a 


mortgage  was  omitted.  See,  also, 
Love  V.  Sierra  Nevada  Min.  Co.,  32 
Cal.  639  (1867). 


102  CONVEYANCE 

lished,  where  the  title  had  passed  to  the  purchaser,  are  more  numer- 
ous (Garson  v.  Grear,  1  J.  C.  R.  308;  Warner  v.  Van  AJstyne,  3 
Paige,  513;  Arnold  v.  Patrick,  6  Paige,  310;  Hallock  v.  Smith,  3 
Barb.  S.  C.  R.  267).  These  cases  proceed  upon  the  same  principle 
which  the  defendant  seeks  to  establish.  The  difference  in  circum- 
stance which  exists  in  the  present  case  is  against  the  plaintiff;  for 
Mr.  and  Mrs.  Rowland  received  back  from  Aylesworth  a  written 
instrument,  in  which  the  lien  reserved  was  explicitly  stated,  while, 
in  the  cases  referred  to,  the  lien  was  predicated  on  the  implied 
intention  of  the  parties  without  a  writing  or  even  a  verbal  agree- 
ment for  that  purpose.  Another  example  of  the  same  doctrine  is 
furnished  where  there  is"  an  executory  contract  for  the  purchase  of 
lands,  the  title  remaining  in  the  vendor;  and  subsequently  to  the 
contract  he  suffers  liens  upon  the  premises  to  be  created.  It  is 
well  settled  that  the  interest  of  the  vendee  will  be  protected  against 
every  one  but  a  bona  fide  purchaser  or  incumbrancer  who  has  ad- 
vanced money  or  property  without  notice  of  the  vendee's  equity 
(Lane  v.  Ludlow,  6  Paige,  316,  note;  Parks  v.  Jackson,  11  Wend. 
442).  In  such  cases,  the  vendee  is  considered  in  equity  as  the 
owner,  and  the  vendor  as  his  trustee. 

Assuming  that  it  has  been  shown  that  Sarah  Rowland  occupied 
the  position  of  a  mortgagee  of  the  land  to  secure  the  agreement  of 
Aylesworth  to  support  her  during  her  life,  the  next  inquiry  is, 
whether  the  plaintiff,  by  recovering  a  judgment  against  him  and 
purchasing  the  premises  on  the  execution,  is  in  a  better  situation 
than  he  would  have  been  were  she,  or  her  representatives,  now  as- 
serting a  claim  against  him  to  subject  the  premises  to  the  payment 
of  a  compensation  for  the  provision  which  he  had  failed  to  make. 
Upon  this  point,  the  cases  already  referred  to  for  another  purpose, 
and  many  others,  are  entirely  decisive.  It  will  be  sufficient  to  men- 
tion the  case  In  the  Matter  of  Howe,  and  that  of  Arnold  v.  Patrick, 
which  are  full  to  this  purpose.  In  the  last  case,  the  equitable  lien 
for  the  balance  of  the  purchase  money  was  established  against  a 
judgment  creditor  who  had  sold  the  land  on  execution,  and  had 
himself  become  the  purchaser.  The  chancellor  said  the  plaintiff 
in  the  judgment  was  not  entitled  to  claim  protection  as  a  bona  fide 
purchaser,  even  if  he  had  no  notice  of  the  facts  establishing  the 
equitable  lien;  "for,"  he  added,  "he  bid  in  the  property  on  his 
own  judgment  for  an  antecedent  debt,  paying  no  new  considera- 
tion. He,  therefore,  took  the  legal  title  under  the  sheriff's  sale, 
subject  to  the  equitable  hen  for  the  unpaid  purchase  money." 

Considering  the  rights  of  the  parties  to  be  such  as  have  been 


CHASE    V.    PECK  103 

mentioned,  and  the  fact  being  that  the  defendant  is  in  possession 
under  Sarah  Rowland,  the  remaining  qneston  is,  whether  the 
plaintiff  can  maintain  ejectment  on  his  legal  title  against  a  party 
clothed  with  her  equitable  interest.  It  is  well  settled,  that  a  mort- 
gagee in  possession,  the  mortgage  being  forfeited  by  non-payment, 
can  defend  himself  in  a  possessory  action  brought  by  the  mort- 
gagor, though,  if  he  were  out  of  possession,  he  could  not  now  main- 
tain ejectment  against  the  latter  (Phyfe  v.  Riley,  15  Wend.  248). 
But  this,  I  think,  is  not  so,  except  in  the  case  of  a  technical  mort- 
gage, conveying,  subject  to  the  condition,  a  legal  title  to  the  prem- 
ises (Marks  v.  Pell,  Jackson  v.  Parkhurst,  supra).  If  the  present 
were,  therefore,  an  action  of  ejectment,  prosecuted  under  the  for- 
mer practice,  in  w^hich  nothing  but  legal  principles  could  be  taken 
into  consideration,  then,  as  the  deed  from  Aylesworth  to  IMrs.  How- 
land  has  been  found  to  be  fraudulent,  I  think  the  defendant  could 
not  resist  the  plaintiff's  title.  But,  since  the  blending  of  legal  and 
equitable  remedies,  a  different  rule  must  be  applied.  The  defen- 
dant can  defeat  the  action  upon  equitable  principles;  and  if.  upon 
the  application  of  these  principles,  the  plaintiff  ought  not  to  be  put 
into  possession  of  the  premises,  he  cannot  recover  in  the  action.  It/ 
has  been  shown  that  the  premises  were,  in  effect,  mortgaged  to' 
Rowland  and  his  wife  to  secure  the  performance  of  Aylesworth's 
agreement  to  support  them  and  the  survivor  of  them  during  life, 
and  that  the  plaintiff  has  taken  the  place  of  Aylesworth.  When 
he  obtained  title  by  the  execution  of  the  sheriff's  deed,  Aylesworth 
had  been  in  default  in  the  performance  of  his  agreement  for  nearly  \ 
three  years.  Mrs.  Rowland  and  her  grantees,  it  is  true,  had  been 
in  possession,  and  had  enjoyed  the  use  of  the  premises,  but  no 
account  has  been  taken  to  show  how  far  the  income  derived  from 
that  source  would  go  in  fulfilment  of  the  agreement.  This  action 
is  not  brought  for  a  redemption,  and  is  not  adapted  to  that  kind 
of  relief.  It  would  be  manifestly  inequitable  to  let  the  plaintiff 
into  possession  until  he  shall  procure  an  account  to  be  taken, 
and  shall  pay  or  tender  the  amount  which  shall  be  found  in  ar- 
rear  upon  the  above  mentioned  agreement,  executed  by  Ayles- 
worth, for  the  support  of  Mrs.  Rowland  up  to  the  time  of  her 
death. 

The  judgment  of  the  Supreme  Court  must  be  reversed;  and,  as 
we  cannot  certainly  say  what  case  the  plaintiff  may  make,  now 
that  the  legal  principles  which  govern  the  action  have  been  deter- 
mined, there  must  be  a  new  trial,  with  costs  to  abide  the  event.  If 
the  main  features  of  the  case  cannot  be  changed,  the  only  remedy 


104  CONVEYANCE 

for  the  plaintiff  is  to  institute  a  suit  for  redemption,  upon  the 
principles  which  have  been  mentioned. 
All  the  judges  concurring, 

Judgment  reversed,  and  new  trial  ordered} 


BURDICK  V.  JACKSON 

Supreme  Court  of  New  York,  General  Term,  1876 

(7  Hun,  488) 

Appeal  from  a  judgment  entered  on  the  report  of  a  referee  dis- 
missing the  complaint. 

The  action  was  brought  by  the  plaintiff  as  assignee  in  bank- 
ruptcy, to  set  aside  a  mortgage  given  by  the  bankrupt  to  his  nieces, 
the  defendants,  Ida  J.  Jackson  and  Carrie  A.  Jackson,  on  the 
ground  that  it  was  a  fraudulent  preference  under  the  bankrupt 
act.  The  mortgage  was  executed  eighteen  days  before  the  filing  of 
the  petition  in  bankruptcy,  but  was  given  in  pursuance  of  a  parol 
agreement  between  the  bankrupt  and  the  guardian  of  the  infants 
more  than  fifteen  months  before. 

This  appeal  was  argued  at  the  January  term,  1875,  and  a  re- 
argument  ordered  at  the  October  term  following. 

Gilbert,  J.  We  concur  fully  with  the  referee  in  his  conclusions 
of  fact  and  of  law.  ^ne  of  the  first  principles  of  equity  isjjiatat 
looks  upon  things  agreed  to  be  done,  as  actually  performed.  Act- 
ing  upon  this  prmcipleTcourts  of  eouity  in  England  and  in  this 
country Jiave  held  that  an  agreement  based  upon  f^.  vRhiahlp!  cnn- 
sidgration  to  give  a  mortgageTwill  be  treated  in  equity  as  a  mort- 
gage. That  doctrine  has  been  acted  upon  so  frequentlyand  Tor 
so  long  a  period  of  time  that  it  may  justly  be  regarded  as  forming 
a  part  of  the  law  of  the  land  (Story  Eq.  Jur.,  §  553;  Russel  v.  Rus- 
sel,  1  Bro.  C.  C.  269,  and  notes  to  that  case  in  1  Lead.  Cases  Eq. 
541;  Read  v.  Simons,  2  Desauss.  552;  Welsh  v.  Usher,  2  Hill  Eq. 
167;  Dow  V.  Ker,  1  Spen.  Eq.  414;  Bank  v.  Carpenter,  7  Ohio,  21; 
In  re  Howe,  1  Paige,  125;  Chase  v.  Peck,  21  N.  Y.  581;  Willard 
Eq.,  Potter's  ed.  441,  et  seq).  If,  therefore,  the  agreement  of  De- 
cember, 1871,  had  been  made  directly  with  the  defendants,  Ida  and 
Carrie,  there  can  be  no  question  that  it  would  have  given  them  a 


1  See  Hall  v.  Hall,  50  Conn.  104  (1882). 


BURDICK    V.    JACKSON 


105 


specific  equitable  lien  upon  the  land  in  eontrovei's}-,  which  woukl 
have  been  prior  and  paramount  to  the  title  of  the  plaintiff  and  to 
the  general  hens  of  the  judgment  creditors  whom  he  represents. 
^Having  been  made  with  their  guardian  while  they  were  infants, 
it  inured  to^their  beneht  and  was  well  executed  by  the  mortgage  to 
thflt~wTrilp  the  agreement,  reniamed  executory 


thenx. 

it  was  within  thp  statntp  of  frauds,  and  so  not  enforcible  for  the 

reason  that  it  was  not  in  w^-iting,  yet,  when  the  promisor  actually 


exeCUtfe^^e  agreement  by  the  delivery  of  a  formaljnortga^^^^ 
objection  to  its  validity,  on  that  ground,  was  removed,  and  th^ 
,  agreement  became  as  effectual  for  all  purposes_as  if  it  had  been_ 
^  reduced  to  writing  originally  (Simeon  v.  Schurk,  29  N.  Y.  598; 
Dodge  v.  WeUman,  i  Abb.,  Ct.  App.  Dec.  512;  In  re  Howe,  supra; 
White  V.  Carpenter,  2  Paige,  217;  Arnold  v.  Patrick,  6  id.  310). 
JTnder  our  statute  a  parol  agreement  in  respect  to  lands  cannot_ 
be  avoided  iji_eaiiita-becauseTtrr5~riot  m  writing,  where^there  has 
been  a  part  performance  of  it  {Freeman  v.  Freeman,  43  N.  Y.  34). 
A  fortimi,  it  cannot  whereTt  has  beenfully  executed.    The  plain- 
tiff is  not  a  bona,  fide  purchaser,  but  stands  i.n..tlig__shoes  of^he 
bankrupt.    He  cannot,  therefore,  assert  any  better  right  than  the 
bankrupt  himself     Tlie  execution  of  themortgage  gave~nTP  dp-' 
"fendants  a  hen,  which  took"effect,  byrelatlon,  as  against  the  bank- 
"~rupt  and  purchasers  from  him  with  notice,  at  the  tmie  the  agree^ 
^  ment  to  give  it  was  made.     The  plaintiff,  not  being  a  bona  fide 
purchaser,  took  the  transfer  to  him  subject  to  that  lien.     That 
being  so,  no  question  of  fraud  or  of  a  preference  in  violation  of 
the  provisions  of  the  bankrupt  act  has  arisen,  and  the  evidence 
precludes  any  inference  of  other  kinds  of  fraud.    It  is  unnecessary 
to  review  the  cases  cited  on  behalf  of  the  appellants,  for  none  of 
them  seem  to  us  to  conflict  with  the  foregoing  views. 

The  plaintiff  is  not  in  a  position  to  raise  the  objection  that  the 
agreement  to  discharge  the  old  mortgage  and  to  receive  the  new 
one  in  lieu  of  it  was  invalid  because  the  guardian  violated  his  duty 
and  transcended  his  power  in  making  such  an  agreement.  Such  a 
transaction  is  not  absolutely  void,  but  is  voidable  only,  at  the  elec- 
tion of  the  infants  on  coming  of  age.  It  being  obviously  for  the 
benefit  of  the  infants  that  the  lien  shall  be  estabUshed  and  upheld, 
we  will  give  effect  to  the  intendment  that  their  ratification  will  be 
forthcoming  at  the  proper  time  and  to  the  rule  that  no  one  but 
themselves  can  disavow  the  authority  of  their  guardian  to  make 
the  agreement  (Co.  Lit.,  26;  2  Kent  Com.  236;  Keane  v.  Boycott, 
2  H.  Bl.  511;  U.  S.  v.  Bainbridge,  1  :\Iason,  82).     The  plaintifT 


106  CONVEYANCE 

has  no  claim  to  be  the  champion  or  protector  of  the  infants  and 
can  acquire  no  rights  by  assuming  that  character. 

Some  objections  to  the  admission  of  evidence  were  taken  by  the 
plaintiff.    We  think  they  were  properly  overruled. 

The  judgment  should  be  affirmed,  with  costs,  to  be  paid  out  of 
the  estate  of  the  bankrupt,  if  that  is  sufficient;  otherwise  by  the 
plaintiff  personally. 

Smith,  J.,  concurred. 

MuLLiN,  P.  J.,  concurred  solely  on  the  ground  that  it  was  shown 
on  the  trial  that  the  defendants  were  not  at  the  time  of  receiving 
the  mortgage  aware  of  the  insolvence  of  the  mortgagor,  and  that 
the  mortgage,  as  to  them,  was  in  fraud  of  the  bankrupt  law.^ 

Judgment  affirmed,  with  costs. 


Ahrend  v.  Odiorne,  118  Mass.  261  (1875).  Gray,  C.  J.  The 
plaintiff  principally  reUes  upon  the  doctrine  of  the  English  courts 
of  chancery  that  the  vendor  of  real  estate  by  an  absolute  deed  has 
a  lien  thereon  for  the  unpaid  purchase  money,  without  proof  of 
any  agreement  of  the  parties  to  that  effect. 

The  earliest  case  which  contains  a  full  discussion  of  the  doctrine, 
the  source  from  which  it  is  derived,  and  the  reasons  and  authorities 
by  which  it  is  supported,  is  Mackreth  v.  Symmons,  15  Ves.  329, 
decided  by  Lord  Eldon  in  1808.  If,  as  the  learned  chancellor 
thought,  "the  doctrine  is  probably  derived  from  the  civil  law  as  to 
goods,"  it  is  somewhat  remarkable  that  it  was  never  applied  in 
England  except  to  real  estate  (Adams  on  Eq.  127).  The  only 
grounds  upon  which  it  has  been  rested  are  natural  equity;  a  sup- 
posed intention  of  the  parties;  and  a  trust  arising  out  of  the  un- 
conscientiousness  of  the  vendee's  holding  the  land  without  paying 
the  price. 

1  But  cf.  Mathews  v.  Hardt,  79  App.  In  Nat.  Park  Bank  v.  Whitmore, 

Div.  570  (1903),  where  O'Brien,  J.,  104  N.  Y.  297  (1887),  Earl,  J.,  said 

said  at  p.  581:  "The  trend  of  the  (dictum)  at  p.  303:    "Security,  hon- 

decisions  ...  is  in  support  of  the  estly  given  in  pursuance  of  a  promise, 

view  that,  with  respect  to  an  instru-  relates  back  to  the  date  of  the  prom- 

ment  of  transfer,  it  is  the  time  when  ise,    and,    except   as   to    intervening 

such  instrument  is  recorded,  or  when  rights,  is  just  as  good  and  effectual 

possession  is  taken,  or  notice  is  other-  as  if  given  at  the  date  of  the  promise; 

wise  brought  home  to  the  creditors  and  it  has  been  generally  so  held 

of  the  bankrupt,  that  is  controlling."  even    in    bankruptcy    proceedings," 

Distinguishing    the    principal    case  citing  the  principal  case, 
(p.  579). 


AHREND    V.    ODIORNE  107 

It  was  forcibly  argued  by  counsel  in  Blackburne  v.  Gregson,  1 
Cox  Ch.  90,  100;  s.  c.  1  Bro.  Ch.  420,  and  not  answered  by  the 
court,  "As  to  the  general  question  of  the  lien,  it  is  called  a  natural 
lien;  but  it  certainly  is  not  so  with  respect  to  personalty,  which,  if 
once  delivered,  it  is  conclusive,  though  concealed  from  all  man- 
kind; and  there  seems  as  much  natural  equity  in  the  case  of  per- 
sonalty as  realty," 

The  presumption  of  an  intention  of  the  parties  has  been  well  dis- 
posed of  by  Chief  Justice  Gibson:  "The  implication  that  there  is 
an  intention  to  reserve  a  lien  for  the  purchase  money,  in  all  cases 
in  which  the  parties  do  not  by  express  acts  evince  a  contrary  inten- 
tion, is  in  almost  every  case  inconsistent  with  the  truth  of  the  fact, 
and  in  all  instances,  without  exception,  in  contradiction  of  the 
express  terms  of  the  contract,  which  purport  to  be  a  conveyance 
of  everything  that  can  pass"  {Kauffelt  v.  Bower,  7  S.  &  R.  64, 
76,  77). 

The  theory  that  a  trust  arises  out  of  the  unconscientiousness  of 
the  purchaser  would  construe  the  non-performance  of  every  prom- 
ise, made  in  consideration  of  a  conveyance  of  property  to  the  prom- 
isor, into  a  breach  of  trust;  and  would  attach  the  trust,  not  merely 
to  the  purchase  money  which  he  agreed  to  pay,  but  to  the  land 
which  he  never  agreed  to  hold  for  the  benefit  of  the  supposed 
cestui  que  trust. 

The  most  plausible  foundation  of  the  English  doctrine  would 
seem  to  be  that  justice  required  that  the  vendor  should  be  enabled, 
by  some  form  of  judicial  process,  to  charge  the  land  in  the  hands 
of  the  vendee  as  security  for  the  unpaid  purchase  money.  And 
the  restriction  of  the  doctrine  to  real  estate  suggests  the  inference 
that  the  Court  of  Chancery  was  induced  to  interpose  by  the  con- 
sideration that  by  the  law  of  England  real  estate  could  neither  be 
attached  on  mesne  process,  nor,  except  in  certain  cases  or  to  a 
limited  extent,  taken  in  execution  for  debt  (2  Bl.  Com.  160,  161; 
4  Kent,  Com.,  12th  ed.,  428,  429). 

But  by  an  act  of  Parliament,  passed  in  1732,  lands  and  other  real 
estate  within  the  English  colonies  were  made  chargeable  with  debts 
and  subject  to  hke  process  of  execution  as  personal  property  (St.  5 
Geo.  II.,  c.  7,  §  4).  And  in  Massachusetts  lands  had  been  made 
subject  to  attachment,  as  well  as  execution,  by  successive  statutes 
of  the  Colony  and  Province,  reaching  back  almost  to  the  time  of 
the  first  settlement  (Col.  Sts.  1644,  1647;  2  Mass.  Col.  Rec.  80, 
204;  Mass.  Col.  Laws,  ed.  1672,  7,  104;  Prov.  St.  1696,  8  W.  III., 
€.  10;  1  Mass.  Prov.  Laws,  State  ed.,  254;  Anc.  Chart.  49,  154,  155, 


108  CONVEYANCE 

292;  5  Dane  Ab.  23).  There  is  much  less  reason  therefore  for  adopt- 
ing the  doctrine  in  this  Commonwealth  than  in  England  (Womhle 
V.  Battle,  3  Ired.  Eq.  182;  Wragg  v.  Comptroller  General,  2  Desaus. 

509). 

In  Gilman  v.  Brown,  1  Mason,  191,  219,  Mr.  Justice  Story  said: 

1"  Nothing  can  be  clearer  than  that  by  the  law  of  Massachusetts  no 
lien  in  any  case  whatever  exists  upon  land  for  the  purchase  money." 
In  the  argument  of  the  same  case  on  appeal,  this  was  admitted  on 
both  sides  {Broum  v.  Gilman,  4  Wheat.  255,  264,  273)  and  the 
Supreme  Court,  in  the  opinion  delivered  by  Chief  Justice  Marshall, 
expressed  no  doubt  upon  that  point.  Mr.  Dane  also  says  that  no 
such  lien  exists  in  Massachusetts  (9  Dane  Ab.  159). 

It  is  true  that  in  their  time  this  court  had  a  very  limited  juris- 
diction in  chancery.  But  ever  since  1836  it  has  been  vested  with 
full  equity  jurisdiction  over  all  trusts,  express  or  implied  (Rev. 
Sts.,  c.  81,  §  8,  &  commissioners'  notes;  Wright  v.  Dame,  22  Pick. 
55;  Gen.  Sts.,  c.  113,  §2).  During  this  period  of  almost  forty 
years,  only  two  attempts  have  been  made  to  invoke  the  exercise  of 
this  jurisdiction  in  cases  at  all  analogous  to  the  present.  In  Wright 
V.  Dame,  5  Met.  485,  503,  the  general  question  of  vendor's  lien  was 
argued;  but  as  the  facts  of  the  case  showed  an  express  trust,  it  was 
not  decided.  But  the  opinion  of  the  court  in  Hunt  v.  Moore,  (> 
Cush.  1,  3,  strongly  tends  to  the  conclusion  that  the  failure  of  a 
purchaser  of  land  to  pay  the  consideration  agreed  could  not  create 
an  implied  or  resulting  trust.  The  suggestion,  at  the  close  of  that 
opinion,  that  a  court  of  full  equity  powers  might  perhaps  afford 
the  plaintiff  relief,  did  not  relate  to  the  trust  relied  on,  but  to  an 
allegation  of  fraud,  of  which,  as  a  distinct  head  of  equity  juris- 
diction, this  court  had  no  cognizance  until  the  passage  of  the  St. 
of  1855,  c.  194. 

The  English  doctrine  of  vendor's  lien  has  been  adjudged  not  to 
exist  in  Maine  (Philbrook  v.  Delano,  29  Maine,  410,  415).  And 
it  does  not  appear  to  have  been  ever  adopted  in  any  of  the  New 
England  States,  except  Vermont,  in  which,  after  being  affirmed  by 
the  court,  it  has  been  abolished  by  the  Legislature  (Arlin  v.  Brown, 
44  N.  H.  102;  Perry  v.  Grant,  10  R.  I.  334;  Dean  v.  Dean,  6  Conn. 
285;  Atwood  v.  Vincent,  17  Conn.  575;  Manly  v.  Slason,  21  Vt. 
271;  St.  of  Vt.  of  1851,  c.  47;  Gen.  Sts.  of  Vt.  of  1862,  c.  65,  §  33). 

In  Brown  v.  Gilman,  4  Wheat.  255,  290,  Chief  Justice  Marshall 
treated  the  question  as  governed  by  the  consideration  whether  the 
doctrine  had  been  adopted  by  the  law  of  the  particular  State.  And 
the  doctrine  has  never  been  affirmed  by  the  Supreme  Court  of  the 


AHREND    V.    ODIORNE  109 

United  States,  except  where  established  by  the  local  law,  as,  for 
instance,  in  Ohio  {Bayley  v.  Greenleaf,  7  Wheat.  46;  Tiernan  v. 
Beam,  2  Ohio,  383),  in  Georgia  (M'Lean  v.  M'Leltan,  10  Pet.  625, 
640;  Harden  v.  Miller,  Dudlej^,  120),  and  in  the  District  of  Cohnn- 
bia  (Chiilon  v.  Brand,  2  Black,  458) ;  the  do(;trine  having  been  pi-e- 
viously  affirmed  in  the  States  of  Maryland  and  Virginia,  out  of 
which  the  district  had  been  formed  (Moreton  v.  Harrison,  1  Bland, 
491;  Redford  v.  Gibson,  12  Leigh,  332);  although  it  has  since  been 
abolished  in  Virginia  by  statute  (Yayicey  v.  Mauck,  15  Grat.  300). 

The  decisions  in  the  courts  of  those  and  many  other  States  in 
favor  of  the  doctrine,  which  are  collected  in  the  notes  to  2  Sugden 
on  Vendors,  8th  Am.  ed.,  c.  19,  suggest  no  reasons  and  afford  no 
grounds  why  we  should  now  for  the  first  time  adopt  in  this  Com- 
monwealth a  doctrine  which  has  never  been  supposed  by  the  pro- 
fession to  be  in  force  here;  which  would  introduce  a  new  excep- 
tion to  the  statute  of  frauds;  which,  as  experience  elsewhere  has 
shown,  tends  to  promote  uncertainty  and  litigation;  and  which 
appears  to  us  to  be  unfounded  in  principle,  unsuitable  to  our 
condition  and  usages,  and  unnecessary  to  secure  the  just  rights  of 
the  parties.  If  no  third  person  has  acquired  any  rights  in  the  land 
by  bona  fide  attachment  or  conveyance,  the  original  vendor  may 
secure  payment  of  the  debt  due  him  for  the  purchase  money  by 
the  usual  attachment  on  mesne  process.  If  any  third  person  has 
acquired  rights  in  the  property,  there  is  no  reason  why  equity,  any 
more  than  the  common  law,  should  interpose  to  defeat  them. 

It  may  be  doubted  whether,  upon  the  case  stated  in  the  bill,  the 
plaintiff  would  be  held  entitled  to  the  lien  which  he  asserts  in 
those  courts  which  recognize  the  existence  of  a  vendor's  lien  for 
unpaid  purchase  money  (1  Perry  on  Trusts,  §  235).  But  as  we  are 
clearly  of  opinion  that  no  such  lien  exists  in  this  Commonwealth 
in  any  case  without  agreement  in  writing,  we  do  not  propose  to 
entangle  ourselves  in  the  refinements  and  embarrassments  which 
are  inseparable  from  its  judicial  consideration  and  affirmance. 


ilO  CONVEYANCE 

ELTERMAN  v.   HYMAN 

Court  of  Appeals  of  New  York,  1908 

(192  N.  Y.  113) 

Appeal  from_a-iLidgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  first  judicial  department,  entered  I'ebruary  ll, 
1907,  affirmiriPi  «  judgment  in  favor  of  defen^dant  entered  upon  a_ 
dismissal  of  the  complaint  by  the  court  on  triaTaTSpmarrerm. 

This  action  was -brought  to  tpcov^  the_  amount  paid  upon^a 
contract  for  the  purcjiase  of  land  as  well  as  the  amount  incurred 
for  expenses  in  examining^  the  title  and  to  establish  and  enforce  a 
lien  therefor  upon  the  groundtEaTtte  plaintiff  was  ready  and  wiTl-^ 
"m'g  to  perform  while  the  defendant  was  not  because  thetitle  was 
'unmarkStggleT  TEe"answer  admitted  "tlTe~contract  and  the  pay- 
ment  made  thereon,  but  denied  tiie~remaining  allegations  of  Ipe 
iiomplaint.  It  alleged  facts  constituting  a  counterclaim  and  asked 
that  the  plaintiff  be  adjudged  to  specifically  perform  by  paying  the 
balance  of  the  purchase  price. ^ 

Vann,  J.  The  question  remains  whether  a  vendee,  not  in  pos- 
session  and  with  no.SEecial_equity,  has'a  lieiTfor  the  amount  paid 
on  a"l;ontract  for  the  purchase  oTland  that  can  be  foreclosed  upqn^ 
the  default  of  the  vendor?  The  Appellate  Division  in  the  first 
"department,  after  thorough  discussion,  two  elaborate  opinions 
having  been  written,  one  on  either  side,  has  held  that  a  hen  exists 
for  the  amount  paid  on  the  contract,  but  not  for  the  expense  of 
examining  the  title.  {Occidental  Realty  Co.  v.  Palmer,  117  App.  Div. 
505.)  The  rule  in  the  second  department  is  that  no  lien  exists 
even  for  the  purchase  money  paid  down,  unless  the  vendee  has 
taken  possession.  (Klim  v.  Sachs,  102  App.  Div.  44.)  The  sub- 
ject was  not  considered  at  length  in  the  case  last  cited,  only  three 
sentences  being  devoted  to  it;  and  while  the  judgment  was  modified 
by  striking  out  the  part  giving  a  lien,  it  was  affirmed  as  to  the 
recovery  of  the  sum  paid  on  the  contract,  although  the  action  was 
in  equity.  This  case  was  followed  without  discussion  by  the  same 
court  in  Krainin  v.  Coffey  (119  App.  Div.  516). 

The  right  of  a  vendor  to  a  lien  for  the  purchase  money  unpaid  is 
well  estabUshed,  and  the  courts  of  this  state  have  uniformly  recog- 

1  Statement     of     facts     abridged.      Only    portion    of    the    opinion    of 

Vann,  J.,  is  printed. 


ELTERMAN  V.    HYMAN  111 

nized  the  right  of  a  vendee  to  a  lien  when  he  was  in  possession,  or 
had  made  improvements,  or  where  special  equities  intervened. 
{Parks  V.  Jackson,  11  Wend.  442;  Chase  v.  Peck,  21  N.  Y.  581; 
Gibert  v.  Peteler,  38  N.  Y.  165;  Tompkins  v.  Seeley,  29  Barb.  212, 
217.)  In  some  cases  in  this  state  and  generally  in  other  states 
which  give  a  lien  to  the  vendor,  a  hen  has  been  decreed  although 
there  was  no  equity  except  that  arising  from  payment  on  the  land, 
pursuant  to  a  contract  for  the  land,  provided  the  vendor  made 
default.  (Occidental  Realty  v.  Palmer,  supra;  Stevenson  v.  Spratt, 
3  J.  &.  S.  496,  503;  Clark  v.  Jacobs,  56  How.  Pr.  519;  Craft  v.  La- 
tourette,  62  N.  J.  Eq.  206;  Bullitt  v.  Eastern  Ky.  Land  Co.,  99  Ky. 
324,  327;  Shirley  v.  Shirley,  7  Blackf.  [Ind.]  452;  Coleman  v.  Floyd, 
131  Ind.  330,  335;  Galbraith  v.  Reeves,  82  Tex.  357;  Newnan  v. 
Maclin,  3  Hayw.  [Tenn.]  241;  Sautelle  v.  Carlisle,  13  Lea  [Tenn.], 
391,  397;  Wickman  v.  Robinson,  14  Wis.  493,  496.) 

The  question  does  not  appear  to  have  been  before  the  Supreme 
Court  of  the  United  States,  although  it  has  declared  that  "the 
vendor  is  a  trustee  of  the  legal  title  for  the  vendee  to  the  extent  of 
his  payments."    [Jennisons  v.  Leonard,  21  Wall.  302,  309.) 

W^e  find  no  well-considered  case  in  any  state  that  denies  a  lien 
to  the  vendee,  even  if  payment  is  the  only  ground  therefor,  except 
such  as  withhold  a  hen  from  the  vendor  also.  (Ahrend  v.  Odiorne, 
118  Mass.  261;  Philbrook  v.  Delano,  29  Me.  410.)  The  doctrine 
is  well  established  in  England  where  it  is  sometimes  said  to  have 
originated  as  recently  as  1855,  but  it  was  clearly  announced  nearly 
twenty  years  before  the  Revolutionary  war  by  a  court  of  which 
Lord  Mansfield  was  a  member.  (Burgess  v.  Wheate,  1  W. 
Blacks,  123,  150.)  It  was  recognized  by  Lord  St.  Leonards  in 
the  first  edition  of  his  great  work  on  Vendors  and  Purchasers, 
published  in  1805  (p.  671),  and  three  years  later  by  Lord  Eldon 
in  Macreth  v.  Symm,ons  (15  Vesey,  Jr.,  329,  344).  In  1855,  how- 
ever, the  question  arose  directly  and  although  the  vendee  was  not 
in  possession  and  there  was  no  special  equity  in  his  favor  he  was 
held  to  have  a  hen  both  upon  principle  and  authority.  (Wythes  v. 
Lee,  3  Drewry's  Ch.  396,  403.) 

In  1864  the  question  was  fully  discussed  in  the  House  of  Lords 
and  it  was*  adjudged  without  dissent  that  the  vendee  has  a  lien, 
because  every  payment  by  him  in  pro  tanto  performance  of  the 
contract  on  his  part  and  in  equity  transfers  to  him  a  corresponding 
portion  of  the  estate.    (Rose  v.  Watson,  10  H.  L.  Cas.  672.) 

Quite  recently  a  case  arose  in  the  Chancery  Division  of  the  Court 
of  Appeal  where  a  contract  for  the  purchase  of  land  authorized  the 


112  CONVEYANCE 

purchaser  to  rescind  on  the  happening  of  a  specified  event  and  in 
due  exercise  of  the  power  he  rescinded  the  contract,  but  it  was 
held  that  he  had  a  hen  on  the  land  for  the  deposit  which  he  had 
made.  (Whitbread  &  Co.  Limited,  v.  Watt,  L.  R.  [1  Ch.  Div.  1902] 
835.)  _    ^_ 

In  the  case  last  cited  the  hen  is  spoken  of  as  the  invention  of 
equity  for  the  purpose  of  doing  justice,  but  this  is  the  foundation 
of  all  equitable  liens.  They  did  not  exist  at  common  law,  but  were 
created  by  courts  of  equity  because  required  by  natural  equity. 
They  do  not  depend  upon  express  contract,  but  on  the  principle 
that  one  person  has  the  legal  title  to  something  that  another  person 
has  a  natural  and,  hence,  within  well-guarded  hmits,  a  better  right 
to,  or  to  some  part  thereof. 

Whether  the  foundation  of  the  hen  is  natural  equity,  imputed 
intention,  partial  ownership,  the  implication  of  a  trust,  or  a  blend- 
ing of  some  of  these  sources,  the  authorities,  almost  without  excep- 
tion in  those  jurisdictions  which  give  a  lien  to  the  vendor,  are  clear 
that  one  exists.  As  the  vendor  has  a  hen  because  he  owned  the 
land  but  conveyed  prematurely  and  the  vendee  ought  not  to  keep 
it  without  paying  for  it,  so,  as  it  seems  to  me,  the  vendee  has  a  lien 
l)ecause  he  has  paid  for  the  land  pursuant  to  contract,  and  as  he 
cannot  get  the  land,  he  has  a  right  to  get  out  what  he  put  in  on  the 
faith  of  the  land.  The  hen  springs  from  the  trust  under  which  the 
vendor,  as  the  legal  owner,  holds  the  land  for  the  vendee,  the  equi- 
table owner.  Part  payment  creates  partial  ownership,  and  the 
vendee  has  an  interest  in  the  land  itself  to  the  extent  of  the  pay- 
ments made  thereon.  The  contract  and  payment  in  full  make 
him  the  equitable  owner  of  all  the  land.  The  contract  and  pay- 
ment in  part  make  him  the  equitable  owner  pro  tanto.  When  the 
vendor  cannot  convey,  the  equitable  owner,  wholly  or  in  part, 
may  assert  his  rights  in  a  court  of  equity  to  get  out  of  the  land  what 
he  paid  on  it.  If  the  vendor  is  not  the  absolute  owner,  the  lien  of 
the  vendee  "exists  only  to  the  extent  of  the  vendor's  interest," 
which  in  this  case  is  only  that  of  a  sub-purchaser.  {Aheraman 
Iron  Works  v.  Wickens,  L.  R.  [4  Ch.  App.]  101;  Fry  on  Specific 
Performance  [3d  Am.  ed.],  660.)  The  right  is  corelative  to  that 
of  the  vendor  conveying  without  payment.  In  either  case  the 
res,  or  the  subject  of  the  contract,  is  the  land,  and  whatever  is 
paid  on  the  land  without  corresponding  conveyance,  or  conveyed 
without  corresponding  payment,  is  a  lien  on  the  land  by  virtue  of 
parting  with  money  on  the  faith  of  the  land,  or  with  land  on  the 
faith  of  the  promise  to  pay  for  it.    Payment  is  not  made  on  the 


ELTERMAN   V.    HYMAN  113 

credit  of  the  vendor,  but  on  the  credit  of  the  land,  and  the  pur- 
chaser's money,  in  equity,  is  converted  into  land,  or  attached  to  it 
as  a  lien.  The  equitable  ownership,  when  specific  performance 
cannot  be  had,  is  converted  into  money  by  a  judicial  sale  of  the 
vendor's  interest,  which  in  effect  is  the  foreclosure  of  an  equitable 
mortgage. 

It  is  insisted  that  the  whole  agreement  is  to  be  taken  together  and 
completely  performed  or  wholly  rescinded,  and  that  rescission  by 
the  vendee  destroys  the  contract  in  toto  and  ah  initio.  The  same 
argument  was  urged  by  counsel  in  Rose  v.  Watson,  and  the  complete 
answer  of  Lord  Westbury  has  already  been  quoted.  None  of  the 
authorities  relating  to  the  lien  of  a  vendee,  and  we  have  cited  but 
few  out  of  many,  seem  to  regard  the  doctrine  of  rescission  as  at  all 
applicable  to  the  subject.  This  is  not  an  action  at  law  resting  on 
rescission  by  which  an  election  is  made  to  declare  the  contract  void 
in  its  inception,  but  a  suit  in  equity  resting  on  the  equitable  prin- 
ciple that  the  vendee  by  the  contract  and  payment  acquired  an 
interest  in  the  land.  Rescission  was  neither  alleged  nor  found  and 
as  the  affirmance  was  unanimous  we  cannot  look  into  the  evidence 
for  further  facts.  The  vendee  does  not  elect  to  nullify  the  contract 
nor  seek  remission  to  his  original  rights  when  he  asserts  his  acquired 
rights,  depending  wholly  on  the  contract  and  his  action  thereunder. 
He  recognizes  the  contract  as  a  subsisting  obligation,  vahd  in  its 
inception  and  still  in  force,  and  founds  his  entire  claim  for  relief 
on  the  theory  that  because  it  is  valid  and  he  has  made  payments 
on  it  as  required  by  it,  he  has  become  an  owner  of  .the  land  in  equity 
to  the  extent  of  such  payments.  He  accepts  "the  situation  which 
the  wrongdoing  of  the  other  party  has  brought  about,"  and  tries 
to  get  out  of  the  land  what  he  paid  on  it  under  the  contract.  The 
termination  of  a  contract  as  to  the  future  by  one  party  owing  to 
the  default  of  the  other  is  a  rescission  neither  ah  initio,  nor  in  any 
true  sense.  {Hurst  v.  Trow  P.  cfc  B.  Co.,  2  Misc.  Rep.  301,  366; 
142  N.  Y.  637.)  If  it  were,  it  would  involve  the  surrender  of  pos- 
session taken  pursuant  to  a  provision  authorizing  it  and  the  aban- 
donment of  all  improvements  made  while  in  possession.  The 
vendee  does  not  rescind  when  without  fault  he  goes  into  a  court 
of  equity  and  insists  on  a  right  springing  from  the  contract  and 
payment  thereon  pursuant  to  its  terms.  He  does  not  repudiate  the 
contract,  but  stands  on  it  and  affirms  it  as  the  foundation  of  the 
right  he  seeks  to  enforce,  as  fully  as  if  he  sought  entire  specific 
performance.  He  does  not  abandon  his  equitable  ownership  l^y 
trying  to  assert  it  in  the  only  way  that  it  can  be  asserted.    The  con- 


1 14  CONVEYANCE 

tract  has  been  performed  by  him,  wholly  it  may  be,  or  in  part, 
as  in  the  ease  before  us,  and  as,  owing  to  the  fault  of  the  vendor, 
he  cannot  have  the  full  performance  to  which  he  is  entitled,  he 
asks  for  partial  performance  by  the  enforcement  of  the  trust  cre- 
ated by  the  contract  and  payment  as  provided  thereby.  He  does 
not  sue  for  money  had  and  received,  but  to  enforce  a  lien  on  land 
into  which  the  money  went.  Nor  does  he  rescind  the  contract, 
which  is  the  source  of  his  lien,  by  seeking  to  enforce  it  to  the  only 
extent  now  possible,  owing  to  the  breach  by  the  vendor,  but  he 
demands  that  equity  should  give  him  the  interest  in  the  land  that 
he  acquired  by  the  contract  and  payment.  The  denial  of  that 
right  would  be  an  encouragement  to  wrongdoing,  and  to  hold  that 
an  attempt  to  foreclose  the  equitable  hen  is  a  rescission  of  the  con- 
tract would  deny  the  right  in  all  cases,  including  those  in  which 
the  vendee  is  in  possession  and  has  made  improvements. 

The  analogy  of  personal  property  is  suggested  and  it  is  argued 
that  the  purchaser  may  pay  on  potatoes  the  same  as  on  land,  but 
the  rules  applicable  to  real  estate,  which,  as  part  of  the  solid  earth, 
is  immovable  and  indestructible,  have  never  been  applied  and  in 
the  nature  of  things  cannot  be  applied  to  movable  property  that 
can  disappear  in  a  moment,  can  be  delivered  from  hand  to  hand 
and  which  usually  is  paid  for  on  delivery.  The  analogy,  if  logically 
and  universally  applied,  would  destroy  many  of  the  rules  of  equity, 
established  after  centuries  of  earnest  thought  by  the  most  learned 
lawyers  known  to  jurisprudence. 

The  judgment  appealed  from  should  be  reversed  and  a  new  trial 
granted,  with  costs  to  abide  the  event. 

CuLLEN,  Ch.  J.,  and  Haight,  J.,  concur;  Gray,  Hiscock  and 
Chase,  JJ.,  concur  in  result  for  reasons  stated  in  opinion  of  Gray, 
J.,  in  Davis  v.  Rosenzweig  Realty  Operating  Co.,^  decided  herewith; 
WiLLARD  Bartlett,  J.,  dissents  solely  on  the  ground  that  no  action 
is  maintainable  to  enforce  a  vendee's  lien. 

Judgment  reversed,  etc} 

» 192  N.  Y.  128  (1908).  sale,  see  Lenox  v.  Earls,  185  S.  W. 

2  As  to  the  availability  of  vendor's  (Mo.)  232,  and  note,  30  Harv.  Law 
lien    to    beneficiary   of    contract   of      Rev.  92  (1916). 


VANIMAN    V.    GARDNER  115 

VANIMAN  V.   GARDNER 

Appellate  Court  of  Illinois,  Third  District,  1901 

(99  III.  App.  345) 

Statement. — On  April  11,  1895,  Anthony  Roberts  and  his  wife 
entered  into  the  following  written  agreenment  with  their  son,  Moss 
Roberts : 

"Agreement  between  Anthony  Roberts  and  Sarah  J.,  his  wife, 
of  the  first  part,  and  Moss  Roberts,  their  son,  second  part.  Wit- 
nesseth,  that  said  Anthony  Roberts  is  the  owner  of  the  N.  W.  14 
of  the  N.  W.  14  section  24,  township  No.  12,  range  No.  6,  west 
of  the  3rd  P.  M.,  in  Macoupin  county,  Illinois,  on  which  all  of  said 
parties  reside  and  occupy  as  a  homestead;  and,  whereas,  it  is  de- 
sirable that  a  new  house  shall  be  erected  on  said  tract  of  land  for 
the  comfort  and  use  of  all  said  parties  so  long  as  they  shall  live 
upon  said  tract  of  land.  It  is  therefore  agreed  by  the  said  parties 
that  said  Moss  Roberts  shall  erect  on  said  premises  a  house  which, 
shall  be  convenient  and  suitable  for  the  use  of  said  parties,  includ- 
ing the  family  of  Moss  Roberts.  That  Moss  Roberts  shall  have  the) 
right  to  pull  down  the  old  house  now  on  said  premises  and  use  the; 
material  thereon  fit  to  be  used  in  building  the  new  house,  and  saidj 
new  house  shall  be  built  and  completed  within  the  next  ninety 
days  after  the  date  of  this  agreement. 

And  in  consideration  of  the  said  building,  the  said  parties  of  the 
first  part  agree  that  in  case  they  shall  sell  the  said  tract  of  land,  then 
there  shall  be  due  and  payable  to  said  Moss  Roberts  out  of  the 
money  arising  from  such  sale  the  sum  of  S500,  together  with  inter- 
est thereon,  from  the  time  of  the  completion  of  said  house  until 
paid,  at  the  rate  of  six  per  cent  per  annum,  and  in  case  of  the  death 
of  the  said  Anthony  Roberts  leaving  no  will  by  virtue  of  which 
said  Moss  Roberts  shall  become  devisee  and  owner  of  said  tract 
of  land,  then  and  in  that  case,  there  shall  be  paid  to  said  Moss 
Roberts,  out  of  the  estate  of  said  Anthony  Roberts,  the  said  sum 
of  $500,  together  with  six  per  cent  interest  thereon  from  the  com- 
pletion of  said  house  until  paid. 

(Signed)  Anthony  Roberts,  (Seal.'^ 
Sarah  J.  Roberts,  (Seal.) 
Moss  Roberts."         (Seal.) 

The  instrument  was  filed  for  record  and  recorded  in  the  re- 
corder's office  of  Macoupin  county,  July  12,  1895. 


116  CONVEYANCE 

The  house  was  built  by  Moss  Roberts  with  money  obtained  from 
a  bank  at  Virden,  Illinois,  on  notes  executed  by  him  and  George 
Vaniman  as  security.  The  written  agreement  was  delivered  to 
Yaniman  and  afterward  indorsed  as  follows: 

"I  assign  the  benefit  of  the  within  contract  to  George  Vaniman 
as  security  to  him  for  signing  notes. 

(Signed)  Moss  Roberts." 

In  1898  Anthony  Roberts  and  wife  conveyed  the  land  to  Martha 
J.  Roberts,  who,  on  August  18,  1900,  executed  note  and  mortgage 
on  the  land  to  Alva  L.  Gardner,  to  secure  an  indebtedness  of  S500, 
due  ten  days  after  date.  Gardner  filed  a  bill  to  foreclose.  Appel- 
lants, the  administrators  of  George  Vaniman,  who  were  made 
defendants,  together  with  others,  answered  and  filed  a  cross- bill, 
in  which  they  set  up  that  there  was  a  lien  in  favor  of  the  deceased, 
by  virtue  of  the  above  quoted  agreement,  and  its  assignment,  and 
a  payment  by  them,  as  administrators  of  Geo.  Vaniman,  of  the 
notes  on  w^hich  he  was  surety  for  Moss  Roberts.  The  court  sus- 
tained a  demurrer  to  the  cross-bill,  holding  that  appellants  had 
no  lien  on  the  land,  and  rendered  a  foreclosure  decree  in  favor  of 
Gardner. 

Mr.  Presiding  Justice  Harker  delivered  the  opinion  of  the 
court. 

It  is  contended  by  appellant,  first,  that  under  the  written  agree- 
ment of  April  11,  1895,  an  equitable  lien  or  mortgage  was  given 
Moss  Roberts  upon  the  land  in  question,  whereby  equity  wiW 
enforce  the  paj^ment  of  the  $500  specified  in  the  agreement,  as  a 
first  lien  upon  the  land,  second,  that  appellants  are  subrogated  to 
all  rights  of  Moss  Roberts  under  the  agreement  by  virtue  of  his 
assignment  thereof  to  George  Vaniman. 

I  While,  as  a  general  rule,  any  written  contract  entered  into  for 
the  purpose  of  pledging  property  or  some  interest  therein  as  secu- 
rity for  a  debt,  which  is  informal  or  insufficient  as  a  common  law  or 
statutory  mortgage,  but  wliich  shows  that  it  was  the  intention  of 
the  parties  that  it  should  operate  as  a  charge  upon  the  property, 
will  constitute  an  equitable  mortgage  and  may  be  enforced  as  such 
in  a  court  of  equity,  yet  a  mere  promise  to  pay  out  of  the  proceeds 
.of  the  sale  of  the  property  is  not  sufficient  to  create  an  equitable 
mortgage  upon  the  property  itself. 

"The  intention  must  be  to  create  a  lien  upon  the  property, 
as  distinguished  from  an  agreement  to  apply  the  proceeds  of 
a  sale  of  it  to  the  payment  of  a  debt."     Jones  on  Liens,  Sec.  32; 


PERRY    V.    BOARD    OF    MISSIONS  117 

<7)'6.sow  V.  Decius,  82  111.  304;  Hamilton  v.  Downer,  46  111.  App. 

541. 

We  are  unable  to  see  in  the  written  contract  involved  in  this  case 
an  intention  on  the  part  of  Anthony  Roberts  to  create  a  lien  or 
charge  upon  the  land.  It  did  not  obligate  him  to  sell  the  land  and 
clearly  contemplated  that  he  might  or  might  not  sell  it,  as  he  saw 
fit.  It  only  provided  two  events  in  which  there  should  be  due  his 
son  the  $500;  one  in  case  he  should  sell  the  land  and  the  other  in 
case  he  should  die  leaving  no  will  under  which  his  son  should  be- 
come owner  of  the  land.  In  the  former  case  the  son  was  to  be  paid 
out  of  the  proceeds  of  sale,  and  in  the  latter  he  should  be  paid  out 
of  the  estate  of  Anthony  Roberts.  As  we  view  it,  the  import  of 
the  contract  was  more  to  fix  events  for  the  maturity  of  an  obliga- 
tion than  to  pledge  the  land  for  its  payment. 

It  is  evident  that  there  was  no  intention  that  Moss  Roberts 
should  have  a  lien  on  the  land  for  the  money  in  the  event  of  his 
father  dying  intestate,  because  the  language  of  the  contract  is, 
that  in  that  event,  he  should  be  paid  out  of  his  father's  estate. 
Again,  the  provision  that  in  the  event  of  sale  by  Anthony  Roberts, 
the  money  should  be  paid  Moss  Roberts  out  of  the  proceeds  of  the 
sale,  fully  recognizes  the  right  of  the  former  to  sell,  and  that  right 
carried  with  it  the  power  to  invest  his  purchaser  with  the  title 
free  from  any  lien  arising  out  of  the  contract.  If  the  contract 
created  no  equitable  lien  in  favor  of  Moss  Roberts,  none,  of  course, 
can  be  held  to  exist  in  favor  of  his  assignee. 

The  evidence  shows  that  the  S500  note  to  Gardner  represented 
a  bona,  fide  debt,  and  there  is  nothing  in  the  record  to  warrant  a 
suspicion,  even,  that  the  giving  of  the  mortgage  to  him  had  any 
other  than  an  honest  purpose  to  secure  the  debt. 

Decree  affirmed} 

PERRY   V.   BOARD  OF  MISSIONS 

Court  of  Appeals  of  New  York,  1886 

(102  N.  Y.  99) 

Appeal. from  judgment  of  the  General  Term  of  the  Supreme 
rnuvt  I'n  thp  thirH  indicia!  department,  entered  upon  an  order 
made  February  4,  1884,  which  affirmed  a  judgment  in  favor  df 
plaintiff,  entered  upon  the  report  of  a  referee. 

This  action  was  brouglit  to  have  a  lien  declared  in  the  nature 
'Accord,  Britl  v.  Harrell,  105  N.  C.  10  (1890). 


118  CONVEYANCE 

of  a  mor^flgp  upon  f^p^tgjnjrpmispsj  the  title  to  which  is  in  the  __ 
defendant,  for^aonevs  advanced  bv  glaintiff  to  ^ay  for  repairs  and 
improvements  upon  saj 

Danforth,  J.  Upon  trial  before  a  referee  the  plaintiff  has  been 
declared  entitled  to  a  lien  in  the  nature  of  a  mortgage  upon  cer- 
tain premises  on  Elk  Street,  in  the  city  of  Albany,  for  a  balance 
due  him  for  advances  made  for  improvements  and  repairs  thereon 
and  for  interest  on  an  existing  mortgage,  amounting  to  the  sum 
of  S4677.38,  besides  costs,  and  in  case  the  same  is  not  paid  within 
a  certain  time,  that  said  real  estate  be  sold  in  the  same  manner  as 
sales  are  made  upon  mortgage  foreclosure,  and,  of  the  proceeds  of 
such  sale,  the  plaintiff  be  paid  the  amount  of  said  hen,  with  inter- 
est as  aforesaid,  together  with  his  costs  and  disbursements.  Upon 
appeal  to  the  General  Term  the  judgment  upon  this  report  was 
affirmed. 

Some  objections  were  made  by  the  defendant  to  the  admission 
of  certain  testimony,  but  it  is  not  now  contended  that  the  facts 
found  by  the  referee  are  not  warranted  by  the  evidence,  or  that 
they  were  not  within  the  issues  raised  by  the  pleadings.  The  con- 
tention is  against  the  referee's  conclusion  of  law.  It  appears  by 
his  report  that  in  September,  1869,  the  Right  Reverend  William 
Croswell  Doane  was  bishop  of  Albany,  and  at  that  time  by  the  ac- 
tion of  the  convention  of  the  Protestant  Episcopal  Church  in  that 
diocese  a  committee  was  appointed  to  take  such  steps  as  they  might 
deem  expedient  for  procuring  a  residence  for  the  bishop;  that  in 
February,  1870,  the  vestry  of  St.  Peter's  church,  in  that  cit}',  ap- 
pointed a  committee,  of  which  the  plaintiff  was  chairman,  to  solicit 
subscriptions  for  the  above  purpose,  and  in  that  character  he  re- 
ceived moneys  from  various  persons,  in  all  to  the  amount  of  S12,- 
825,  and  in  June,  1870,  under  the  advice  of  the  bishop,  and  with 
the  consent  of  the  diocesan  committee,  he  bought  the  premises 
above  referred  to  at  the  price  of  $18,000  (of  which  $5000  was  in  a 
then  existing  mortgage) .  He  paid  the  residue,  and  upon  like  con- 
sent caused  the  property  to  be  conveyed,  subject  to  the  mortgage, 
to  a  corporation  called  "The  Trustees  of  the  Episcopal  Fund  of  the 
Diocese  of  Albany;"  that  thereupon  "plaintiff,  at  the  request  of 
the  bishop,  commenced  making  various  improvements,  alterations 
and  repairs  in  the  dwelHng  upon  the  premises  so  purchased,  all  of 
which  were  necessary  and  proper  to  make  it  a  suitable  and  con- 
venient residence  for  him,  and  the  plaintiff  advanced  the  moneys 
required  to  pay  the  bills  for  such  improvements  and  repairs;  that 


PERRY   V.    BOARD    OF    MISSIONS  119 

at  the  annual  meeting  of  the  diocesan  convention,  in  September, 
1870,  the  diocesan  committee  made  a  report  which  stated  the  man- 
ner in  which  the  title  was  taken,  described  the  property  and  re- 
ferred to  the  repairs  and  improvements.  This  report  was,  on 
motion,  accepted."  And -at  the  same  time  the  convention,  with  the 
consent  of  the  trustees  of  the  Episcopal  fund,  directed  them  to 
transfer  the  title  to  said  property  to  the  defendant  herein,  "to  be 
held  and  used  for  the  support  of  the  Episcopate,  and  be  a  place  of 
residence  for  the  bishop  of  the  diocese,  and  that  the  said  board  of 
missions  be  authorized  and  directed  to  make  a  bond  and  mortgage 
on  the  premises  to  secure  the  payment  of  the  incumbrance  thereon, 
of  SoOOO,  and  also  the  payment  of  the  sum  advanced  for  the  repairs 
and  fitting  up  of  the  same  for  the  Episcopal  residence,"  intending 
thereby  to  provide  for  and  cover  all  the  expenditures  incurred  by 
plaintiff  for  the  improvements  and  repairs  then  in  progress,  and 
contemplated  and  included,  as  well  the  sums  thereafter  advanced 
as  those  which  had  then  been  actually  paid. 

The  defendant  is  a  corporation  having  power,  among  other 
things,  to  take  and  hold  property  used  or  intended  to  be  used  for 
"diocesan  institutions  or  purposes  in  the  said  diocese,"  and  is 
subject  to  the  directions  and  instructions  which  shall  be  given  to  it 
by  the  said  convention  (Laws  of  1870,  c.  13). 

At  this  time  the  repairs  and  improvements  were  in  progress, 
and  only  the  sum  of  $173.92  had  then  been  advanced  by  plaintiff 
in  payment  therefor.  On  the  20th  of  October,  1870,  in  accordance 
with  the  above  directions,  the  trustees  of  the  Episcopal  fund  of  the 
diocese  of  Albany  conveyed  the  premises  to  defendant  in  trust  as 
a  residence  for  the  bishop  of  Albany,  and  on  the  same  daj^,  at  a 
regular  meeting  of  the  board,  the  following  resolution  was  passed: 

"Resolved,  That  this  board  do,  in  accordance  with  the  direc- 
tion of  the  convention,  hereby  accept  the  conveyance  of  the  said 
premises,  to  be  held  in  trust  for  the  uses  and  purposes  above  men- 
tioned, and  further  that  the  president  of  this  board,  the  Rt.  Rev. 
William  Croswell  Doane,  S.  T.  D.,  Bishop  of  Albany,  be  and  is 
hereby  authorized  in  its  name  and  behalf  to  execute  and  affix  the 
corporate  seal  of  this  board  to  a  bond  and  mortgage  upon  the  said 
premises  for  a  loan  not  to  exceed  S8500,  with  interest,  the  proceeds 
of  which  shall  be  applied  to  the  pajTnent  of  the  said  existing  mort- 
gage of  $5000  thereon,  and  the  said  expenses  of  the  said  repairs  and 
improvements,"  and  in  pursuance  of  said  resolution  on  Decem- 
ber 30,  1870,  defendant,  by  its  president  aforesaid,  executed  and 
delivered  to  one  Earl  L.  Stimson  a  bond  with  a  mortgage  upon  the 


120  CONVEYANCE 

premises  aforesaid  for  the  sum  of  $8500,  which  sum  was  loaned  and 
advanced  to  it  by  said  Stimson,  and  was  by  it  paid  over  to  plaintiff, 
who  paid  out  of  the  same  the  mortgage  of  S5000,  and  the  interest 
thereon,  then  unpaid,  amounting  in  all  to  the  sum  of  $5220.47, 
and  the  same  was  cancelled  of  record,  and  the  balance  of  said  sum 
was  credited  and  applied  by  plaintiff  in  his  account  for  the  ad- 
vances made  by  him  as  aforesaid  toward  the  purchase  price  of  said 
premises,  the  expenses  incident  to  the  same,  and  for  said  improve- 
ments and  repairs. 

Other  facts  are  found  which  require  no  special  mention,  but 
which  show  that  the  amount  for  which  a  lien  was  declared  was 
justly  due  for  advances  made  under  the  circumstances  above 

stated. 

It  is  objected  by  the  appellant  that  the  plaintiff  is  not,  by  reason 
of  any  of  these  facts,  entitled  to  an  equitable  lien  upon  the  prem- 
ises for  the  benefit  of  which  they  were  made.  We  are  of  a  different 
opinion. 

The  principle  upon  which  a  court  holds  that  a  vendor  who  has 
not  been  paid  is  entitled  to  a  lien  on  the  land  sold  is  that  it  would 
be  contrary  to  natural  justice  to  allow  a  purchaser  to  retain  an 
estate  which  he  has  not  paid  for,  and  it  seems  very  clear  that  there 
is  a  hke  natural  equity  in  favor  of  the  plaintiff.  It  is  true  he  did 
not  sell  the  estate,  but  he  added  to  it,  and  by  his  expenditures  upon 
it  fitted  it  for  the  purpose  for  which  it  was  intended.  A  lien  for 
the  price  of  an  estate  sold  exists  without  any  special  agreement  and 
by  virtue  of  a  doctrine  merely  of  a  court  of  equity.  Here  there  is  a 
special  agreement  and  also  a  case  to  which  the  doctrine  applies: 

First.  The  special  agreement.  It  may  be  found  in  the  resolu- 
tion of  the  convention  of  1870,  by  which  the  defendant  was  re- 
quired in  substance  to  provide  by  bond  and  mortgage  "for  the 
payment  of  the  sum  advanced  for  the  repairs  and  fitting  up  of  the 
Episcopal  residence  "—the  one  in  question.  The  learned  counsel 
for  the  appellant  seeks  to  limit  this  expression  by  the  rules  of 
grammar,  and  confine  the  security  to  the  sum  then  or  already  ad- 
vanced, to  the  exclusion  of  all  advances  subsequent  thereto.  We 
do  not  think,  however,  that  the  framers  of  the  resolution  selected 
the  word  for  the  purpose  of  marking  either  present  or  future  time, 
but  to  denote  a  fact  which  might  include  various  transactions  re- 
quiring the  expenditure  of  money  by  some  person  other  than  them- 
selves, the  whole,  by  whomsoever  or  whenever  made,  constituting 
"the  sum  advanced,"  in  rendering  the  place  fit  and  suitable  as  a 
residence  for  the  bishop  of  the  diocese.    The  resolution  in  question 


PERRY    V.    BOARD    OF   MISSIONS 


121 


was  in  writing;  it  was  entered  in  the  journal  of  the  convention,  and 
the  defendant  was  bound  to  conform  to  it  (C.  13,  Laws  of  1870, 
supra). 

Second.  The  phiintiff's  case  is  within  the  general  doctrine  of 
equity,  which  gives  a  right  equivalent  to  a  lien,  when  in  no  other 
way  the  rights  of  parties  can  be  secured.^  The  advances  were 
directly  for  the  benefit  of  the  real  estate;  they  were  approved  by 
the  convention  by  whose  directions  the  title  was  conveyed  to  the 
defendant,  but  neither  the  convention  nor  the  defendant  have  in- 
curred any  corporate  liability,  and  while  it  may  be  said  that  the 
advances  were  made  oh  the  promise  of,  or  in  the  just  and  natural 
expectation  that,  a  mortgage  would  be  given,  it  is  also  true  that 
they  were  made  on  the  credit  of  the  property,  for  the  improvement 
of  which  they  were  expended.  The  repairs  and  improvements 
were  permanently  beneficial  to  it,  made  in  good  faith,  with  the 
knowledge  and  approbation  of  the  parties  interested,  and  accepted 
by  them,  not  as  a  gratuity,  but  as  services  for  which  compensation 
should  be  given.  The  plaintiff's  right  to  remuneration  is  clear, 
and  unless  the  remedy  sought  for  in  this  action  is  given,  there  will 
be  a  total  failure  of  justice. 

It  would  seem  to  follow  that  no  error  was  committed  by  the 
referee  in  directing  a  sale  of  the  property,  and  the  application  of 
the  proceeds  to  the  payment  of  the  plaintiff's  claim.  But  the 
learned  counsel  for  the  appellant  argues  that  as  the  defendant's 
relation  to  the  property  is  that  of  trustee,  such  enforcement  of  the 
lien  would  destroy  the  trust,  and  so  defeat  the  very  object  of  the 
conveyance  through  which  they  derive  title.  The  trust  was  for  the 
habitation  and  use  of  the  bishop  of  the  diocese;  it  was  accepted 
with  notice  that  the  improvements  were  necessary  to  fit  the  build- 
ings for  occupation,  and  had  been  begun  under  proper  authority. 
It  was  the  duty  of  the  defendant  to  allow  them  to  be  finished,  and 
it  will  be  no  violation  of  the  conditions  upon  which  the  premises 
are  held,  to  subject  them  to  a  charge  for  the  cost  of  the  repairs 
through  which  alone  the  purposes  of  the  trust  were  accomplished. 
If  the  building  should  now  be  burned,  it  might  with  the  same  force 
be  urged  that. the  mechanic  who  might  repair  or  reconstruct  it 
could  acquire  no  lien,  because  enforcing  it  might  diminish  or  even 
absorb  the  property.  A  statutory  lien  would  be  no  better  than  the 
plaintiff's  lien  in  equity. 

The  usual  course  of  enforcing  an  equitablejieiijs-by--a->^l<^-ef 

1  See    also,  Sullivan   v.   Corn   Ex-      change  Bank,  154  Api).  Div.  296,  139 

N.  Y.  S.  97,  101  (1912). 


122 


CONVEYANCE 


J;^hp  property  to  which  it  is.ptianhp(^j,  am]  we  find  nothing  in  this 
case  to  take  it  out  of  the  general  rule.  The  appellant's  remaining 
point  is  a  sweeping  one  relating  to  various  items  of  evidence  of  the 
bishop's  declarations,  letters  and  acts  in  connection  with  the  pur- 
chase and  repairs  of  the  house.  Under  the  circumstances  disclosed 
in  the  record,  they  were  properly  received,  either  as  acts  of  agency, 
or  part  of  the  transaction. 

We  think  the  decision  of  the  referee  was  warranted  by  the  facts 
before  him,  and  that  the  judgment  appealed  from  should  be 
affirmed.^ 

All  concur.  Judgment  affirmed.^ 


SMITH  V.   SMITH 

Court  of  Appeals  of  New  York,  1891 

(125  N.  Y.  224) 

O'Brien,  J.    The  plaintiff  sought  by  this  action  to  compel  the 
defendflrit,  who  is  his  wife^o  conveyjo  him  certam  real  estatejjf, 
which  gV)^  hr^\r\fi  the  title,  or  to  have  a  Hen  m  his  tavor "declared 
thereon.    The  courts  below  have  held  tliat  ne  was  entitled  to  the 
Uen^but  not  to  the  conveyance,  and  as_tl 
by  the  detendant^^_it_ja- onlj?-  nTT* 
upon  which  the  right  t^ such  lien  wasbased. 

In  the  yeai'1863'tHeplaintitt  was  the  o^ner  of  the  real  estate 
described  in  the  complaint,  and  conceTIImg'wliich  the  relief  was 
demanded.  On  the  twenty-first  of  September  in  that  year  he  con- 
veyed it  through  a  third  party  to  the  defendant,  who  has  ever 
since  held  the  title,  though  the  plaintiff  has  managed  it  and  col- 
lected the  rents  and  applied  what  was  not  expended  in  the  payment 


no  appeal  excaot- 
examine  the  gro^oda 


1  Compare  Bright  v.  Boyd,  1  Story, 
478  (1841),  in  which  improvements 
made  by  a  bona  fide  purchaser  of  land 
whose  title  proved  defective  were 
allowed  as  "a  lien  and  charge  on  the 
estate." — Per   Story,    J.,    2   Story, 

.608. 

2  In  Hamilton  Trust  Co.  v.  Clemes, 
163  N.  Y.  423  (1900),  held,  a  mort- 
gage given  by  a  corporation  in  an 
effort  to  perform  a  legal  obligation 
to  give  a  first   mortgage   upon   its 


assets  under  a  contract  entered  into 
by  the  original  directors  of  the  cor- 
poration with  another  corporation, 
which  contract  is  fully  performed  on 
its  part,  is  valid  in  equity  as  against 
junior  judgment  creditors,  even 
though  there  was  a  failure  on  the 
part  of  the  corporation  to  observe 
certain  statutory  requirements.  The 
principal  case  and  Chase  v.  Peck, 
supra,  were  chiefly  relied  upon  by 
the  court.    (See  opinion,  pp.  428-9.) 


SMITH    V.    SMITH  123 

of  taxes,  insurance  and  necessary  repairs  to  the  support  of  the 
family.  The  consideration  expressed  in  the  deed  is  $25,  but  it  is 
quite  evident  that  it  was  a  voluntary  transfer  of  the  property 
by  the  husband  to  the  wife  without  consideration,  and  for  the  pur- 
pose of  better  securing  its  benefits  to  the  family.  The  parties  to 
this  action  have  ever  since  resided  upon  the  property  as  husband 
and  wife,  renting  such  portions  of  it  as  were  not  necessary  for  their 
own  use. 

It  was  found  by  the  Special  Term,  upon  sufficient  evidence,  that 
in  the  spring  of  1879  the  plaintiff  informed  the  defendant,  his  wife, 
that  he  had  some  money  in  the  bank  drawing  only  three  and  a  half 
per  cent  interest,  and  that  by  using  it  in  building  a  block  on  a  por- 
tion of  the  premises  he  could  realize  a  larger  income  from  this 
money.    The  defendant  replied  that  it  would  be  a  good  thing;  that 
he  could  go  on  and  build  there,  and  that  "if  he  got  any  ways  dis- 
tressed in  any  shape  or  manner  he  had  a  right  to  sell  the  block; 
that  it  was  at  his  disposal  at  any  time."    The  plaintiff  replied 
that  it  was  all  right,  and  that  he  would  go  on  and  build  it.    It  is 
also  found  that  relying  upon  this  arrangement  the  plaintiff,  with 
his  own  means,  and  at  an  expense  of  $4,500,  constructed  a  brick 
block  upon  a  portion  of  the  land  which  enhanced  its  value  to  the 
extent  of  the  sum  so  expended,  and  that  the  management  of  the 
property  ever  since  by  the  plaintiff,  the  collection  and  receipt  of 
the  rents,  and  the  disposition  made  by  him  of  the  same,  was  with 
the  defendant's  knowledge  and  consent.     It  was  held  that  the 
plaintiff  was  entitled  to  have  a  lien  declared  upon  the  land  for  the 
sum  so  expended  by  Ijim  with  interest  thereon  from  March  1. 
1887,  the  date  when  the  plaintiff  ceased  to  collect  the  rents  in  con- 
sequence, apparently,  of  some  disagreement  between  the  parties. 
We  think  that  the  judgment  is  correct.    It  would  be  contrary  to 
equity  to  permit  the  defendant,  under  the  circumstances,  to  hold 
the  property  without  subjecting  it  as  security  in  some  form  to  the 
expenditures  made  upon  it  with  her  knowledge  and  consent.    She 
was  informed  by  her  husband  that  he  had  money  invested  at  low 
interest  w^hich  could  be  used  in  improving  the  property  in  such 
way  as  to  yield  a  much  larger  income  to  him.    From  what  was  said 
she  is  chargeable  with  knowledge  of  his  intentions  to  expend  the 
money  only  for  the  purpose  of  making  a  more  profitable  invest- 
ment, and  with  this  knowledge  on  her  part  she  permitted  him  to 
erect  the  building.    Unless  the  transaction  gave  him  some  claim 
or  lien  upon  the  property  he  had,  of  course,  no  investment  at  all 
after  he  drew  the  money  from  the  bank  and  used  it  in  the  construe- 


124  CONVEYANCE 

tion  of  the  block.  The  defendant  had  no  right  to  understand  from 
what  was  said  that  her  husband  intended  to  make  a  gift  of  the 
money  to  her  ]:»y  expending  it  upon  the  property.  What  was  said 
and  done  amounted  to  an  assent  on  the  part  of  the  wife,  that  in 
case  the  husband  used  the  money  in  constructing  the  block  on  the 
land,  of  which  she  was  the  owner,  his  money  would,  at  least,  be  as 
>afe  to  him  as  it  was  before.  Her  remark  that  he  had  the  right  to 
dispose  of  the  block  at  any  time  in  case  he  became  in  any  way 
distressed,  has  no  point  or  significance  unless  it  is  construed  as  an 
assent  on  her  part  that  he  was  to  have  a  lien,  and,  consequently, 
a  right  to  sell  in  virtue  of  the  expenditure  which  he  contemplated 
making  upon  the  property.  The  transaction  was,  in  substance,  an 
agreement  on  her  part  to  give  such  a  hen  in  case  the  expenditure 
was  made. 

Upon  the  findings  made  by  the  trial  court,  the  plaintiff,  acting  in 
good  faith,  and  in  reliance  upon  this  promise,  expended  his  motiey, 
and  the  defendant  has  had  the  full  benefit  thereof,  so  that  in  equity 
she  ought  to  pay  for  the  same. 

We  do  not  conceive  it  to  be  necessary  to  quote  at  length  from  the 
elementary  books  upon  equity  jurisprudence,  or  from  the  adjudged 
cases  the  language  in  which  the  principles  are  expressed  that  sus- 
tain the  judgment  in  this  ca.se.  A  citation  of  these  authorities  is 
sufficient.  (1  Story  Eq.  Juris.,  §  388;  2  id.,  §  1237;  3  Pom.  Eq. 
Juris.  233;  Kimfs  Heirs  v.  Thompson,  9  Pet.  204;  Chase  v.  Peck, 
21  N.  Y.  581;  Freeman  v.  Freeman,  43  id.  34;  Hale  v.  Bank,  49  id. 
627;  Husted  v.  Ingraham,  75  id.  255;  Perry  v.  Board,  102  id.  99.) 

It  is  urged  in  support  of  this  appeal  th^t  the  husband  cannot 
invoke  the  power  of  a  court  of  equity  for  the  purpose  of  obtaining 
relief  until  he  first  does  equity  by  accounting  to  her  for  the  rents 
received  by  him,  and  which  were  used  for  the  support  of  the  family, 
an  obligation  which  the  law  imposes  upon  the  husband  alone.  That 
point  was  not  specifically  raised  at  the  trial,  and  for  that  reason 
alone  should  not  now  prevail  to  reverse  the  judgment.  It  does  not 
appear,  however,  what  sum,  if  any,  remained  of  the  rents  after  the 
payment  of  taxes,  insurance,  repairs  and  interest  on  the  S4,500. 
That  balance,  whatever  it  was,  is  all  that  can  be  said  to  have  been 
used  by  the  husband  for  the  payment  of  family  expenses.  It  was 
the  income  of  property  that  formerly  belonged  to  the  husband,  and 
which  he  deeded  to  the  wife  without  consideration,  and  it  was  ac- 
cepted by  her,  evidently,  with  the  tacit  understanding  on  both  sides 
that  the  income  should  be  used  as  it  had  been  before,  and  as  it 
actually  was  used  to  some  extent,  for  the  benefit  of  the  family. 


SMITH    V.    SMITH 


125 


This  is  apparent  from  the  conduct  of  the  parties,  for  the  husband, 
notwithstanding  the  conveyance,  continued  to  manage  the  prop- 
erty and  collect  and  use  the  rents  as  if  the  transfer  had  never  y)een 
made,  and  in  this,  so  far  as  appears,  the  wife  acquiesced.  The  wife 
having  assented  to  the  disposition  which  her  husband  made  of  the 
rents,  cannot  now  change  her  position  and  ask  him  to  account  to 
her  therefor.  His  application  of  some  part  of  the  rents  to  the  sup- 
port of  the  family  was  not,  under  all  the  circumstances,  inequitable 
as  against  his  wife,  but  her  refusal  to  give  him  a  lien  or  secuiity 
for  the  money  expended  in  building  upon  the  property  was.  This 
favorite  maxim  of  equity  does  not,  as  it  seems  to  us,  apply  to  this 
case.  An  agreement  to  give  a  hen  upon  landjo  secure  moneyjD 
be  expended  in  improving  it^oiiowed  by  an  actual  expenditure  o^ 
"IMniOhkiS,  and  Lhe'Unprovement  contemplated,  is  so  tar  pertofmed_ 
— TKat  equity  does  not  regard  the  Statute  of  i^Yauds  as  a  defenselo 
an  action  to  enforcethe_  agreement.  (Freeman  v.  Freeman,  supra; 
^Hurdick  V.  Jackson,  /  ITun,  488;  Pom.  Specif.  Perf.,  §  30.) 

We  think  the  judgment  is  based  upon  correct  principles,  and  that 
it  should  be  affirmed,  with  costs. 

All  concur,  except  Ruger,  Ch.  J.,  and  Finch,  J.,  dissenting. 

Judgment  affirmed} 


1  In  Sprague  v.  Cochran,  144  N.  Y. 
104  (1894),  O'Brien,  J.,  said  at 
pa^es  112-113:  "There  can  be  no 
doubt  upon  the  authorities  that 
where  one  party  advances  money  to 
another  upon  the  faith  of  a  verbal 
agreement  by  the  latter  to  secure  its 
payment  by  a  mortgage  upon  cer- 
tain lands,  but  which  is  never  exe- 
cuted, or  which,  if  executed,  is  so 
defective  or  informal  as  to  fail  in 
effectuating  the  purpose  of  its  execu- 
tion, equity  will  impress  upon  the 
land  intended  to  be  mortgaged  a  lien 
in  favor  of  the  creditor  who  ad- 
vanced the  money  for  the  security 
and  satisfaction  of  his  debt.  This 
lien  attaches  upon  the  payment  of 
the  money  and,  unless  there  is  a 
waiver  of  it,  express  or  implied,  re- 
mains and  may  be  enforced  so  long 
as  the  debt  itself  may  be  enforced, 
and  no  waiver  can  be  implied  from 
the  act  of  the  creditor  in  receiving  a 


mortgage  which  by  reason  of  fraud, 
inadvertence  or  mistake  is  not  ef- 
fectual to  secure  specific  Hen  on  the 
lands  or  any  part  of  them,  nor  is 
this  lien  merged  in  any  such  instru- 
ment subsequently  executed.  Dc 
Peyster  v.  Hashronck,  11  N.  Y.  582; 
Payne  v.  Wilson,  74  id.  348;  Cotnait 
V.  Lakey,  80  id.  345;  Husted  v.  In- 
graham,  75  id.  251;  Haverly  v.  Becker, 
4  id.  169;  Glacken  v.  Brown,  39  Hun. 
294;  Lanning  v.  Tompkins,  45  Barb. 
308;  Matter  of  Howe,  1  Paige,  125: 
Smith  V.  Smith,  125  N.  Y.  22i;  Hoag  v. 
Town  of  Greenwich,  133  id.  152.  .  .  . 
The  doctrine  of  equitable  mortgajic 
is  not  limited  to  written  instrument'^ 
intended  as  mortgages,  but  which  >)>• 
reason  of  formal  defects  cannot  have 
such  operation  without  the  aid  of 
the  court,  but  also  to  a  very  great 
variety  of  transactions  to  which 
equity  attaches  that  character.  It 
is  not  necessary  that  such  transac- 


126  CONVEYANCE 

SCHOENHERR  v.   VAN  METER 

Court  of  Appeals  of  New  York,  1915 

(215  N.  Y.  548) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  second  judicial  department,  entered  July  30, 
1913,  affirming  a  judgment  in  favor  of  defendant  entered  upon  a 
dismissal  of  the  complaint  by  the  court  on  trial  at  Special  Term. 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  are 
stated  in  the  opinion. 

Cardozo,  J.^  The  plaintiff -js  a_mCTciber  of  the  bar.  He  brings 
this  action  to  impress  a  Hen  onproperty  of  the  Brooklyn  Con- 
solidated Drug  Company,  recovered  through  his  services.  One 
Wischerth,  the  treasurer  and  general  manager,  had  misappropri- 
ated the  property  of  the  corporation  and  owed  it  upwards  of  $26,- 
000.  The  plaintiff  was  retained  by  a  director  to  compel  the  de- 
linquent officer  to  account.  The  director  refused  to  be  personally 
hable  for  the  fees.  He  agreed,  however,  that  the  plaintiff  should 
have  a  lien  on  the  cause  of  action  and  on  any  property  recovered. 
This  agreement  was  found  by  the  trial  court,  and  the  finding  has 
been  unanimously  affirmed.  Under  that  retainer,  an  action  was 
brought  to  compel  Wischerth  to  account  for  his  official  conduct 
in  the  management  and  disposition  of  the  funds  and  property 
committed  to  his  charge,  to  compel  him  to  pay  over  the  moneys 
found  due  upon  such  accounting,  or  the  value  of  any  property 
misappropriated  to  his  own  use,  or  lost  or  wasted  by  the  violation 
of  liis  duty.  That  is  an  action  which  a  director  has  the  right  to 
maintain  (General  Corp.  Law,  sees.  90,  91,  formerly  Code  Civ. 
Pr.  sec.  1781;  Miller  v.  Quincy,  179  N.  Y.  294).  After  the  action 
was  begun  Wischerth  gave  to  the  corporation  money  and  other 

tions  or  agreements  as  to  lands  should  does    not    affect    the    power    which 

be  in  writing  in  order  to  take  them  courts  of  equity  have  always  exer- 

out  of  the  operation  of  the  Statute  cised  to  compel  specific  performance 

of  Frauds  for  two  reasons,  first,  be-  of  such  agreements.     (2  R.  S.  134, 

cause  they  are  completely  executed  %\0;  Smithy.  Smith,  supra;  Beardsley 

by  at  least  one  of  the  parties  and  are  v.  Duntley,  69  N.  Y.  577.) " 
no  longer  executory,  and,  secondly.  To  similar  effect.  Dean  v.  Anderson, 

because  the  statute  by  its  own  terms  34  N.  J.  Eq.  496  (1810). 


SCHOENHERR   V.    VAN   METER  127 

property  of  value  in  discharge  of  his  Habilit3^  The  finding,  unani- 
mously affirmed,  is  that  the  money  was  paid  and  the  property 
delivered  as  a  result  of  the  director's  action  and  by  reason  of  the 
services  rendered  by  the  plaintiff  therein.  The  finding  also  is  that 
the  value  of  the  services  is  $1,000,  The  corporation,  appropriating 
the  benefit  of  the  services,  refuses  to  compensate  the  plaintiff, 
and  resists  his  effort  to  establish  a  lien  on  the  proceeds  of  the 
suit. 

We  think  the  lien  should  be  sustained.  We  assume,  in  accord- 
ance with  our  decision  in  Matter  of  Meighan  (106  App.  Div.  599; 
182  N.  Y.  558),  that  the  statutory  lien  created  by  section  475  of 
the  Judiciary  Law  for  the  benefit  of  an  attorney  is  not  enforceable 
under  such  conditions.  That  case  was  a  proceeding  by  petition 
under  the  statute.  The  court  held  that  in  a  suit  by  a  stockholder 
for  the  benefit  of  a  corporation,  the  statutory  lien  of  the  attorney 
does  not  attach  to  the  money  paid  to  the  corporation  perforce  of 
the  judgment.  This  case  presents  a  very  different  situation.  We 
are  not  now  dealing  with  a  statutory  lien  to  be  enforced  in  a  statu- 
tory proceeding.  We  are  dealing  with  a  hen  independent  of  stat- 
ute, to  be  enforced  in  a  plenary  suit  in  equity.  The  director  who 
was  the  plaintiff  in  the  accounting  suit  might  have  paid  the  at- 
torney with  his  own  money.  If  he  had  done  so,  he  would  have  had 
a  lien  for  his  own  reimbursement  on  the  property  recovered  to  the 
use  of  the  corporation  as  a  result  of  his  action.  The  rule  is  that  a 
trust  fund  bear  the  expenses  of  its  administration,  and  that  a 
trustee  who  conducts  a  litigation  to  protect  the  subject  of  the  trust, 
has  a  charge  on  the  fund  for  expenses  incurred  in  the  performance 
of  his  duties  (Woodruff  v.  N.  F.,  L.  E.  &  W.  R.  R.  Co.,  129  N.  Y. 
27;  Meddaugh  v.  Wilson,  151  U.  S.  333,  343;  Central  R.  R.  &  B, 
Co.  of  Ga.  V.  Pettus,  113  U.  S.  116).  The  law  which  imposes  on  a 
director  the  duty  to  hold  a  delinquent  officer  to  account  (Miller 
V.  Quincy,  supra),  does  not  deny  him  indemnity  for  the  expenses 
of  the  accounting.  JElaek^enenforceable  by  this  plaintiff,  is  not; 
therefore,  the  statutory  lien  of  an  attorney.  It  is  a  contractual 
lien,  acquired  by  succession  to  the  potential  lien  of  the  plaintiff 
in  the  action  for  an  accounting.  The  plaintiff  in  that  action,  in- 
stead of  paying  the  attorney  with  his  own  money,  and  seeking 
reimbursement  out  of  the  fund,  chose  another  and  for  himself  a 
safer  course.  He  refused  to  assume  personal  liability  for  the  at- 
torney's services,  but  agreed  that" the  attorney  should  have  a  lien 
on  the  cause  of  actioii  and  its  proceeds.  That  was  a  lawful  con- 
tract.   It  was  a  contract  for  the  transfer  to  the  attornev  of  the 


128  CONVEYANCE 

equitable  lien  of  the  trustee  {New  v.  Nicoll,  73  N.  Y.  127,  131). 
A  trustee,  who  is  unwilHng  to  assume  personal  liability  for  services 
essential  to  the  protection  of  the  trust,  has  the  power,  if  other 
funds  fail,  to  create  a  charge,  equivalent  to  his  own  lien  for  reim- 
bursement, in  favor  of  another  by  whom  the  services  are  rendered 
(Noyes  v.  Blakeman,  6  N.  Y.  567,  579;  New  v.  Nicoll,  supra).  That 
is  exactly  what  this  director  undertook  to  do.  We  think  a  court 
of  equity  will  give  effect  to  his  engagement.  The  plaintiff  rendered 
gervices  of  value,  which  the  corporation  has  appropriated  without 
requitaT  The  plastic  remedy  "ot  an  equitable  lien  is  adequate  in 
suclTa  (iase  to  prevent  a  failure  of  justice  {Perry  v.  Board  of  Mis- 
sions, 102  N.  Y.  99,  105;  Meighan  v.  Am.  Grass  Twine  Co.,  154 
Fed.  Rep.  346). 

The  point  is  made  that  relief  must  be  denied  the  plaintiff  be- 
cause since  this  action  was  begun,  the  corporation  was  adjudged  a 
bankrupt,  and  the  trustee  in  bankruptcy  substituted  as  a  defend- 
ant. In  such  circumstances,  the  trustee's  title  is  subject  to  the 
plaintiff's  equitable  lien,  and  to  the  pending  action  to  foreclose  it 
{Metcalf  V.  Barker,  187  U.  S.  165;  Pickens  v.  Roy,  187  U.  S.  177). 
It  may  be  that  the  state  court  is  without  power  to  take  the  fund 
from  the  possession  of  the  court  of  bankruptcy  {Skilton  v.  Codding- 
ton,  185  N.  Y.  80,  85,  86;  Frank  v.  Volkommer,  205  U.  S.  521,  529). 
It  has  power,  however,  in  this  action,  to  which  the  trustee  has 
voluntarily  become  a  party,  to  declare  the  rights  and  interest 
of  the  litigants  in  the  subject-matter  of  the  controversy.  "We 
may  assume,"  as  we  said  in  Skilton  v.  Coddington  {supra),  "that 
the  bankruptcy  court  will  give  effect  to  any  judgment  recovered 
therein." 

The  facts  essential  to  the  plaintiff's  case  are  established  by  the 
findings.  A  new  trial  is,  therefore,  needless  (Code  Civ.  Pro.,  sec. 
1337;  Farleigh  v.  Cadman,  159  N.  Y.  169).  The  judgment  should 
be  reversed;  the  plaintiff  should  be  decreed  to  have  a  lien  upon  the 
sum  of  $3,500  in  the  hands  of  the  trustee  in  bankruptcy,  the  pro- 
ceeds of  notes  and  mortgage  transferred  by  Wischerth  to  the  cor- 
poration; the  amount  of  the  lien  should  be  fixed  at  $1,000  with 
interest  from  September  6,  1911,  and  costs  of  this  action  in  all 
courts;  and  there  should  also  be  a  personal  judgment  in  favor  of 
the  plaintiff  for  the  amount  of  any  deficiency  remaining  after  the 
lien  has  been  enforced. 

WiLLARD  Bartlett,  Ch.  J.,  Werner,  Collin,  Cuddeback, 
Miller  and  Seabury,  JJ.,  concur. 

Judgment  reversed,  etc. 


NEW  YORK  REAL  PROPERTY  LAW  129 

New  York  Real  Prop.  Law,  §  260.  Effect  of  Grant  or  Mort- 
gage of  Real  Property  Adversely  Possessed. — A  grant  of  real  prop- 
erty is  absolutely  void  unless  the  same  shall  be  made  to  the  people 
of  the  state  of  New  York,  if  at  the  time  of  the  dehvery  thereof  such 
property  is  in  the  actual  possession  of  a  person  claiming  under  a 
title  adverse  to  that  of  the  grantor;  but  such  possession  does  not 
prevent  the  mortgaging  of  such  property,  and  such  mortgage,  if 
duly  recorded,  binds  the  propert\^  from  the  time  the  possession 
thereof  is  recovered  by  the  mortgagor  or  his  representatives,  and 
has  preference  over  any  judgment  or  other  instrument,  subsequent 
to  the  recording  thereof;  and  if  there  are  two  or  more  such  mort- 
gages, they  severally  have  preference  according  to  the  time  of 
recording  thereof,  respectively. 


CHAPTER   I.    (Continued) 
Section  IV. — Mortgages  by  Estoppel 

ROTHSCHILD  v.  TITLE  GUARANTEE  AND  TRUST  CO. 

Court  of  Appeals  of  New  York,  1912 

(204  N.  Y.  458) 

Appeal  fr^^^^  ^  indpment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  second  judicial  department,  entered  August  4, 
1910,  affirming  a  judgment  in  favor  of  plaintiffs  entered  upon  a 
decision  ofthe  court  on  triaj^nt  Spp^^*^^  "^^^T^ 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  ^^   -JLl 
stated  in  the  opinion.  x^^cWsMi^  ^"Sj^ 

Collin,  J.  Xhe  plaintiffs  as  the  executrices  and  devisees  under 
the^robated  will  of  Caroline  Strauss  demand  a  jucT^ment^ompell- 
ing  ^e'^eTendant  to  cancel  and  discharge  of  record  a  mortgage, 
in  form,  held  by  it  upon  premises  owned  by  the  testatrix  at  the^ 
time  of  her  "death  and  devised  to  them.  The  mortgage,  dated 
and  recorded  November  G,  1899,  purported,  onjts  face,_to  have 
been  executed  by  Caroline  Strauss  and  Baldwin  F.  Strauss,  her  hi^s- 
.  band,  to  the  defendant  to  secure  their  bond  of  even  date  for  $2,000, 
to  mature  November  B,  1902,  with  mterest  tronT  its  date  to  be^ 
paid  April  1,  1900,  and  thereafter  semi-annually.  Carolinejtrauss 
'did  not  execute,  and  was  wholly  ignorant  of  ihe  negotiations  for 
and  givmg  of  the  instruments.  Her  name  thereon  was  forged.  - 
Baldwin  F.  Strauss,  the  son  of  Caroline,  negotiated  the  loan,  ef- 
fected the  execution  of  the  bond  and  mortgage  and  received  the 
$2,000  paid  by  the  defendant  in  two  checks  to  the  order  of  Caroline 
Strauss  and  Baldwin  F.  Strauss.  He  was  an  attorney  in  Brooklyn, 
receiving  an  income  of  several  thousands  of  dollars  a  year  and  of 
good  reputation  until  his  disappearance  in  March,  1903.  About 
one  year  after  the  making  of  'the  loan,  Carohne  acquired  full 
knowledge  that  it  had  been  made  upon  the  security  of  the  said 
instruments  and  that  her  signature  had  been  forged  thereon  by  the 
130 


ROTHSCHILD    V.    TITLE    GUARANTEE    AND    TRUST    CO.  131 

procurement  of  Baldwin,  and,  having  such  knowledge,  on  or  about 
November  27,  1900,  caused  to  be  paid  to  the  defendant  out  of  her 
own  moneys  the  six  months'  interest  due  October  1,  1900,  and  on 
or  about  May  1,  1901,  caused  to  be  paid  to  the  defendant  out  of 
her  own  moneys  the  interest  which  then  became  due.  Each  other 
interest  payment  up  to  and  including  that  which  became  due 
October  1,  1904,  was  made  at  or  soon  after  its  maturity,  but  it  does 
not  appear  in  the  defendant's  books  of  account,  duly  kept  in  the 
ordinary  course  of  its  business,  who  made  any  of  the  payments, 
including  those  caused  to  be  made  by  Caroline.  Caroline  died 
December  21,  1903.  Soon  after  October  28,  1904,  the  defendant 
acquired  its  first  knowledge  or  notice  of  the  forgeries,  and  refused 
upon  the  demand  of  the  plaintiffs  to  surrender  the  mortgage. 
Since  Baldwin  F.  Strauss'  disappearance,  defendant  has  made 
diligent  search  and  inquiry  for  him  and  has  learned  that  he  left 
the  state,  but  has  been  unable  to  discover  his  whereabouts  or 
whether  he  is  still  alive.  The  trial  court  rendered  its  judgment, 
which  the  Appellate  Division  affirmed,  that  the  mortgage  was  a 
cloud  upon  the  plaintiffs'  title  and  should  be  discharged  and  sur- 
rendered by  the  defendant.  The  appellant  contends  that  the  facts 
as  found  did  not  authorize  the  judgment. 

A  principle  of  law  is:  Where  a  person  wronged  is  silent  under  a 
duty  to  speak,  or  by  an  act  or  declaration  recognizes  the  wrong 
as  an  existing  and  valid  transaction,  and  in  some  degree,  at  least, 
gives  it  effect  so  as  to  benefit  himself  or  so  as  to  affect  the  rights  or 
relations  created  by  it  between  the  wrongdoer  and  a  third  person, 
he  acquiesces  in  and  assents  to  it  and  is  equitablj"-  estopped  from 
impeaching  it.  The  principle  is  applicable  to  the  facts  found  and 
requires  the  reversal  of  the  judgment. 

When  Caroline  Strauss  acquired,  about  one  year  after  the 
transaction  between  the  defendant  and  her  son,  full  knowledge  of 
the  facts  constituting  the  transaction,  the  right  of  action  to  compel 
the  defendant  to  discharge  the  mortgage  was  vested  in  her.  It  was 
a  cloud  upon  her  title  to  the  lands  it  described,  impeachable  only 
by  extrinsic  evidence  proving  that  it  was  not  her  act  or  deed  and 
was  executed  without  her  knowledge  or  authority.  Nor  did  the 
protection  of  her  property  lie  solely  in  that  right  of  action.  She 
might  have  defended  against  an  attempted  enforcement  of  it  by 
foreclosure,  upon  the  facts  constituting  her  right  of  action  for  its 
cancellation.  {Viele  v.  Judson,  82  N.  Y.  32.)  She  did  not  lose 
this  right  of  action  or  protection  by  her  silence.  The  law  does  not 
withdraw  its  remedies  from  a  person  against  whom  a  wrong  is  com- 


132  CONVEYANCE 

mitted  merely  because  he  in  silence  and  without  proclamation  or 
complaint  recognizes  and  endures  the  wrong.  Mere  silence  or 
passivity  on  the  part  of  Caroline  would  not  have  precluded  her 
from  the  remedies  protective  against  the  effects  of  the  forged  in- 
struments. Her  silence  instigated  no  action  and  caused  no  wrong. 
A  fraudulent  purpose  or  a  fraudulent  result  lies  at  the  basis  of  the 
doctrine  of  equitable  estoppel  through  silence  or  inaction.  Actual 
or  intended  fraud  is  not  an  element  essential  to  it.  Neither  affirma- 
tive acts  or  words  nor  silence  maintained  with  the  fraudulent  in- 
tention of  deceiving  are  indispensable  elements  of  it.  But  it  arises 
only  when,  relatively  to  the  party  invoking  it  or  his  privies,  the 
omission  to  speak  is  an  actual  or  constructive  fraud.  Its  existence 
requires  that  the  party  against  whom  it  acts  remained  silent  when 
he  had  the  opportunity  of  speaking  and  when  he  knew  or  ought  to 
have  known  that  his  silence  would  be  relied  upon,  and  that  action 
would  be  taken  or  omitted  which  his  statement  of  the  truth  would 
prevent,  and  that  injury  of  some  nature  or  in  some  degree  would 
result.  (Thompson  v.  Simpson,  128  N.  Y.  270;  Collier  v.  Miller, 
137  N.  Y.  332.)  Caroline  had  not  information  or  notice  that  the 
mortgage  was  to  be  given,  did  not  participate  in  the  transaction 
and  committed  or  omitted  no  act  moving  the  defendant  to  enter 
into  it.  She  could  not  speak  in  regard  to  it.  Under  the  principles 
we  have  enunciated,  her  silence  after  she  first  heard  of  it  did  not 
equitably  estop  her  from  impeaching  it. 

The  payments  of  interest  by  Caroline  worked  a  different  result, 
the  transaction  of  which  the  forged  mortgage  was  a  part  created 
rights  and  relations  between  the  defendant  and  Baldwin  F.  Strauss. 
The  defendant,  from  the  moment  the  checks  it  gave  Baldwin 
were  paid,  might,  had  it  been  conscious  of  the  truth,  have  availed 
itself  of  civil  remedies  for  the  recovery  from  him  of  the  $2,000; 
it  might  also,  by  its  complaint  and  information,  have  subjected 
him  to  prosecution  criminally.  The  right  of  seeking  restoration 
and  payment  from  the  person  who  accomplished  or  procured  the 
forgeries  was  in  itself  a  substantial  and  valuable  one.  (Leather 
Manufacturers'  Bank  v.  Morgan,  117  U.  S.  96;  Continental  National 
Bank  v.  National  Bank  of  the  Commonwealth,  50  N.  Y.  575.)  Caro- 
Hne  could  not  by  act  or  declamation  diminish  or  thwart  that 
right  and  not  incur  responsibility.  The  defendant  was  entitled 
to  have  it  and  the  relations  between  itself  and  Baldwin  F.  Strauss 
remain  unaffected  by  any  act  or  interference  on  her  part.  It  be- 
lieved that  the  apparent  lien  upon  her  property  created  by  the 
mortgage  apparently  signed  and  acknowledged  by  her  secured 


ROTHSCHILD    V.    TITLE    GUARANTEE   AND    TRUST   CO.  133 

the  payment  of  the  $2,000  it  had  advanced  under  the  belief.  She 
knew  such  fact  and  the  further  fact  that  her  signature  was  a  for- 
gery. The  right  to  foreclose  the  lien  securing  the  interest,  upon  a 
default  in  its  payment,  is  usual  and  ordinary,  and,  it  may  be  pre- 
sumed, such  fact  was  likewise  known  to  her.  We  are  not  required 
to  consider  what  results  an  action  for  the  foreclosure  of  the  mort- 
gage, because  of  a  default  in  the  paj^ment  of  interest  due  October  1, 
1900,  would  have  produced.  A  reasonable,  if  not  necessary,  in- 
ference would  seem  to  be  that  a  disclosure  of  the  forgery  or  a  com- 
pleted foreclosure  would  be  consequent.  It  is  sufficient,  however, 
for  the  purposes  of  our  review  that,  if  the  interest  had  not  been 
paid,  the  right  to  foreclosure  would  have  arisen  and  that  she  hav- 
ing full  knowledge  of  the  facts  paid  the  interest  and  thus  prevented 
the  upspringing  of  the  right  and  the  exercise  of  it  by  the  defendant. 
{Continental  Nat.  Bank  v.  National  Bank  of  the  Commonwealth, 
50  N.  Y.  575;  Voorhis  v.  Olmstead,  66  N.  Y.  113.)  She  by  making 
the  pa>Tnents  recognized  the  mortgage  and  the  lien  it  seemed  to 
create  as  real  and  existing,  extended  their  existence  and  retarded 
or  intercepted  the  natural  growth  and  development  of  the  rights 
and  relations  between  the  defendant  and  her  son,  and  benefited 
her  son  and,  presumptively,  with  her  contemplation,  herself.  She 
could  not  be  permitted  to  thereafter  repudiate  the  mortgage.  The 
paj-ments  of  the  interest  made  by  her  and  their  effects,  and  a 
subsequent  repudiation  of  the  mortgage  by  her  would  be  incon- 
sistent with  each  other,  would  not  be  responsive  to  the  demands  of 
justice  and  good  conscience  and  would  effect  a  fraudulent  result. 
When  a  party  with  full  knowledge,  or  with  sufficient  notice  of  his 
rights  and  of  all  the  material  facts,  freely  does  what  amounts  to'a_ 
recognition  or  adoption  of  a  contract  or  transaction  as  existing, 
or  acts  in  a  manner  inconsistent  with  its  repudiation,  and  so  as^ 
to  affect  or  interfere  with  the  relations  and  situation  of  the  par- 
ties, he  acquiesces  in  and  assents  to  it  and  is  equitably  estopped. 
fTom  impeaching  it,  although  it  was  originally  void  or  voidable. 
(Vohnunin  v.  Michel,  185  N.  Y.  420;  2  Pomeroy's  Equity  Juris- 
prudence f3d  ed.],  sections  816-821,  965.) 

It  is  not  necessary  that  an  equitable  estoppel  rest  upon  a  con- 
sideration or  agreement  or  legal  obligation.  The  courts  apply  it, 
in  accordance  with  established  general  principles,  in  order  that  the 
transactions  and  dealings  may  result  justly  and  fairly  with  the 
parties  concerned  with  them;  and  it  operates  against  an  unjust 
repudiation  of  a  sealed  or  a  forged  instrument.  It  does  not  require 
the  positive,  distinct  action  or  language  needed  and  intended  to 


134  CONVEYANCE 

renew  and  ratify  a  transaction  and  make  it  valid  and  binding;  it 
prohibits  a  person,  upon  principles  of  honesty  and  fair  and  open 
dealing,  from  asserting  rights,  the  enforcement  of  which  would, 
through  his  omissions  or  commissions,  work  fraud  and  injustice. 
It  would  have  prohibited  Caroline  from  maintaining  in  her  life- 
time this  action,  and  manifestly  the  right  of  the  plaintiff  is  only 
that  held  by  her. 

The  judgment  should  be  reversed  and  a  new  trial  granted,  with 
costs  to  abide  the  event. 

CuLLEN,  Ch.  J.,  Gray,  Haight,  Vann  and  Hiscock,  JJ.,  concur; 
Werner,  J.,  dissents. 

Judgment  reversed,  etc. 


PEOPLE'S   TRUST  CO.   v.   SMITH 
Court  of  Appeals  of  New  York,  1915 

(215  A^.  Y.  488) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme  Court  in  the  second  judicial  department  entered  March  3, 
1913,  affirming  a  judgment  in  favor  of  defendant  entered  upon  a 
dismissal  of  the  complaint  by  the  court  on  trial  at  SpeciaTTerm. 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  are 
stated  in  the  opinion. 

Cardozo,  J.  The  defendants  Smith  delivered  to  the  defendarit 
George  F.  Stainton,  described  in  the  record  as  George  F.  Stainton^ 
No.  1,  a  bond  and  mortgage  to  secure  a  debt  of  $3,000.  TEemort«i 
gagee  had  a  nephew  of  the  same  name,  who  is  a  member  of  the  bar^ 
He  is  described  in  the  record  as  Gt'orge  F.  Stainton,  'Ne^.  The 
uncle  placed  the  bond  and  mortgage,  with  other  papers, -m-a  sepa- 
rate bundle,  and  left  them,  solely  for  safekeeping,  in  the  safe  in  the, 
nephew's  office.  The  nephew  purloined  the  bond  and  mortgage, 
and  attempTecT  to  assignHlem  to  the  plain fifiF,  the  People's  Trust 
Company.  He  executed,  in  his  own  handwriting,  a  document  in 
the  form  ol  an  assignment,  and  on  that  security  obtained  from  the 
plaintiff  a  loan  of  $2,000.  The  payment  of  the  loan  was  guar- 
anteed by  the  defendant  Ward.  The  bond  and  mortgage  were 
delivered  to  the  plaintiff  together  with  the  assignment.  Stainton, 
No.  1,  had  no  knowledge  of  the  transaction.  His  good  faith  is 
1    conceded.    The  good  faith  of  the  plaintiff  and  of  Ward,  the  guar- 


people's   trust   CO.    V.    SMITH  135 

antor,  is  also  conceded.    The  question  to  be  determined  is  the  in- 
cidence of  the  loss. 

The  trial  judge  held  that  Stainton,  No.  1,  had  intrusted  the 
custody  of  the  bond  and  mortgage  to  Stainton,  No.  2,  and  had 
estopped  himself,  because  of  the  identity  of  their  names,  from  deny- 
ing the  title  of  the  custodian.  The  estoppel  was  held  to  be  effective, 
however,  only  to  the  extent  necessary  to  save  the  trust  company 
from  loss.  The  trust  company  had  a  remedy  against  the  guarantor. 
Ward,  who  was  found  to  be  amply  solvent.  The  trial  judge  held, 
therefore,  that  the  enforcement  of  the  mortgage  was  unnecessary 
for  its  protection,  and  on  that  ground  gave  judgment  dismissing 
the  complaint.    The  Appellate  Division  affirmed  without  opinion. 

We  think  the  dismissal  of  the  complaint  was  proper,  but  we 
place  our  decision  on  other  grounds  than  those  that  controlled 
the  judgment  in  the  court  below.  In  our  view,  Stainton,  No.  1, 
has  done  nothing  that  estops  him  from  asserting  his  ownership 
of  the  bond  and  mortgage.  It  is  conceded  that  this  would  be  true 
if  the  uncle  and  nephew  had  borne  different  names.  We  think  it 
does  not  cease  to  be  true  because  they  bear  the  same  name.  An 
owner  who  intends  to  put  the  title  in  the  name  of  another  rather 
than  in  his  own  name,  may  lose  his  ownership  by  estoppel.  {Moore  , 
V.  Met.  Nat.  Bank,  55  N.  Y.  41.)  But  no  such  case  is  be- 
fore us  here.  This  owner  never  intended  anything  of  the  kind,  j 
The  name  George  F.  Stainton  as  used  in  this  bond  and  mortgage 
was  not  intended  to  be  the  symbol  of  any  one  except  himself. 
(First  N.  Bank  v.  Am.  Ex.  Nat.  Bank,  170  N.  Y.  88..  90;  Graves  v. 
Am.  Ex.  Bank,  17  N.  Y.  205;  Shipman  v.  Bank  of  State  of  New  York, 
126  N.  Y.  318,  330;  Seaboard  Nat.  Bank  v.  Bank  of  Ajnerica,  193 
N.  Y.  26.)  There  was  no  purpose  to  clothe  the  custodian  with  the 
indicia  of  ownership.  Estoppel,  therefore,  cannot  be  built  in  this 
case  upon  any  representation  that  was  intended  by  the  true  owner. 
It  must  be  built,  if  at  all,  upon  the  owner's  negligence.  To  make 
out  an  estoppel  on  that  ground,  it  is  not  enough  to  show  that  the 
owner  was  careless.  He  must  have  been  careless  in  respect  of 
some  duty  owing  to  the  plaintiff  or  the  public.  {Knox  v,  Eden 
Musee  Am.  Co.,  148  N.  Y.  441,  462;  Swan  v.  N.  B.  Australasian  Co., 
2  H.  &  C.  181.)  Neither  of  these  elements  is  present  in  the  case  at 
hand. 

The  bond  and  mortgage  were  not  accompanied  by  any  blank 
form  of  transfer,  signed  by  the  true  owner.  There  was  nothing 
about  them  to  indicate  that  any  transfer  was  contemplated.  They 
were  the  expression  of  a  static  condition,  of  a  "right  at  rest" 


136  CONVEYANCE 

rather  than  a  "right  in  motion  "  (Holland,  Elements  of  Jurispru- 
dence, p.  132).  It  was  possible,  of  course,  that  the  custodian  might 
personate  the  mortgagee  and  forge  an  assignment.  The  same 
thing  would  have  been  possible,  though  perhaps  more  difficult, 
if  the  names  had  been  different.  Itjs.npt  iQ  h^  overlooked  that 
the  nephew's  act,  though  he  used  his  own  name,  was  none  the  lessji 
forgery.  (Graves  v.  Am.  Ex.  Bank,  17  N.  Y.  205;  People  v.  Peacock, 
6  C6^.  72;  Third  Nat.  Bank  v.  Merchants'  Nat.  Bank,  76  Hun, 
475,  478;  Penal  Law,  section  883.)  The  owner  was  not  at  fault 
for  failing  to  protect  himself  or  the  public  against  the  consequences 
of  such  a  crime.  Many  cases,  not  to  be  distinguished  in  principle, 
sustain  that  conclusion.  Shepard  &  Morse  Lumber  Co.  v.  Eldridge 
(171  Mass.  516,  528)  was  a  case  where  the  holder  of  an  unindorsed 
check  left  it  with  a  clerk  who,  if  care  had  been  used,  would  have 
been  known  to  be  dishonest.  The  clerk  forged  the  indorsement. 
The  court  held  that  the  employer  had  not  lost  his  remedy  through 
negligence.  "He  has  the  right  to  assume  that  his  clerk  will  not 
commit  a  crime,  and  to  rest  upon  the  presumption  that  he  has  not 
stolen  or  forged,  and  will  not  do  so,  and  he  is  under  no  legal  ol«li- 
gation,  either  to  the  drawer  of  the  check  or  to  the  public,  to  see  to 
it  that  the  check  is  not  put  in  circulation  with  a  forged  indorse- 
ment." (Shepard  &  Morse  Lumber  Co.  v.  Eldridge,  supra,  at  p. 
528;  to  the  same  effect,  Varney  v.  Curtis,  213  Mass.  309,  312.) 
Faith  in  the  honesty  of  trusted  friends  and  relatives  is  seldom  negli- 
gence. If  circumstances  may  make  it  negligence,  this  case  does 
not  show  them.  We  may  say,  with  Bovill,  Ch.  J.,  in  Societe 
Generale  v.  Metropolitan  Bank,  Ltd.  (27  L.  T.  849,  856):  "Persons 
are  not  to  be  supposed  to  commit  forgery,  and  the  protection 
against  such  a  crime  is  the  law  of  the  land,  and  not  the  vigilance 
of  parties  in  excluding  all  possibility  of  committing  it,"  and  with 
Brett,  J.,  in  the  same  case  (p.  858) :  "There  is  no  duty  on  any  one 
to  suppose  that  those,  against  whose  character  there  is  no  im- 
putation, will  commit  forgery  whenever  the  opportunity  arises." 
(See,  also,  Knox  v.  Eden  Musee  Am.  Co.,  supra,  at  p.  460;  Schol- 
field  V.  Earl  of  Londesborough,  L.  R.  [A.  C.  1896]  514;  BaxendaJe  v. 
Bennett,  L.  R.  [3  Q.  B.  D.]  525,  530;  Colonial  Bank  v.  Marshall, 
L.  R.  [A.  C.  1906]  559;  Longman  v.  Bath  Electric  Tramways,  Ltd., 
L.  R.  [1  Ch.  1905]  646;  Smith  v.  Prosser,  L.  R.  [2  K.  B.  1907]  735, 
746.) 

We  think,  therefore,  that  the  owner  was  not  negligent  in  leaving 
his  bond  and  mortgage  with  a, nephew  of  the  same  name.  But  if 
there  was  any  negligence,  the  transaction  was  not  one  that  made 


people's    trust    CO.    i'.    SMITH  137 

care  and  diligence  a  duty.  This  court  in  Knox  v.  Eden  Musee  Am. 
Co.  (p.  462,  supra)  adopted  the  words  of  Blackburn,  J.,  in  Swan 
V.  A^.  B.  Australasian  Co.  (2  H.  &  C.  182):  "The  neglect  must  be 
in  the  transaction  itself,  and  be  the  proximate  cause  of  leading 
the  party  into  the  mistake;  and  also,  as  I  think,  that  it  must  be 
the  neglect  of  some  duty  that  is  owing  to  the  person  led  into  that 
belief,  or,  what  comes  to  the  same  thing,  to  the  general  public 
of  whom  the  person  is  one,  and  not  merely  neglect  of  what  would 
be  prudent  in  respect  to  the  party  himself,  or  even  of  some  duty 
owing  to  third  persons,  with  whom  those  seeking  to  set  up  the  es- 
toppel are  not  privy."  The  nature  of  this  transaction  did  not  \ 
charge  the  owner  with  any  duty  to  the  public.  {Varney  v.  Curtis, 
213  Mass.  309,  312.)  It  is  true,  of  course,  in  a  broad  sense  that  by 
intrusting  his  bond  and  mortgage  to  the  nephew  he  made  possible 
the  fraud.  That  would  be  equally  true  if  he  had  intrusted  the 
nephew  with  the  custody  of  diamonds.  Indeed,  the  wrongful 
sale  of  diamonds,  passing,  as  they  do,  from  hand  to  hand,  is  prob- 
ably the  easier  crime  and  one  more  readily  to  be  foreseen.  But  the 
mere  possession  of  a  chattel  with  the  permission  of  the  owner  does 
not  enable  the  possessor  to  transfer  a  title  by  estoppel.  What  is 
true  of  a  chattel  is  true  equally  of  things  in  action.  (Varney  v. 
Curtis,  supra;  Northern  Counties,  etc.,  Fire  Ins.  Co.  v.  Whipp,  L.  R. 
[26  Ch.  D.]  482,  493.)  The  bond  and  mortgage  were  not  delivered 
to  the  agent  to  be  dealt  with  or  disposed  of;  they  were  delivered  for 
safekeeping.  They  were  not  delivered  in  a  form  which  involved 
a  representation  to  the  public  that  any  transfer  was  in  view.  A 
transfer  was  not  invited;  it  was  not  authorized;  and  it  could  be 
accomplished  only  through  a  crime.  An  owner  does  not  forfeit 
his  ownership  for  failing  to  take  good  care  of  a  bond  and  mortgage 
any  more  than  he  forfeits  it  for  failing  to  take  good  care  of  his 
watch. 

We  are  asked  to  apply  to  this  case  the  rules  of  estoppel  that 
govern  the  assignment  of  stock  certificates  {McNeil  v.  Tenth  Na.t. 
Bank,  46  N.  Y.  325),  and  some  other  commercial  documents 
(Bank  of  Batavia  v.  N.  Y.,  L.  E.  &  W.  R.  R.  Co.,  106  N.  Y.  195, 
199:  Bank  ofN.  Y.  N.  B.  Assn.  v.  Am.  D.  &  T.  Co.,  143  N.  Y.  559; 
Coventry  v.  G.  E.  Ry.  Co.,  L.  R.  [11  Q.  B.  D.]  776),  when  indorsed 
in  blank.  The  supposed  analogy  is  deceptive.  "A  blank  indorse- 
ment of  such  an  instrument  signifies  that  some  person  is  expected 
to  have  the  right  to  fill  in  the  >)lank."  (ScoUans  v.  Rollins,  179  Mass. 
346,  352.)  The  owner  who  intrusts  to  another  a  stock  certificate 
thus  indorsed  has  given  currency  to  an  instrument  which  connotes 


138  CONVEYANCE 

by  its  very  form  a  contemplated  transfer.  In  such  circumstances, 
if  the  agent  proves  to  be  dishonest,  the  owner  must  bear  the  loss. 
(Nat.  Safe  Dep.  S.  &  T.  Co.  v.  Hihhs,  229  U.  S.  391;  Union  Trust 
Co.  of  Rochester  v.  Oliver,  214  N.  Y.  517;  McNeil  v.  Te7ith  Nat.  Bank, 
supra.)  But  there  is  no  such  implication  in  the  delivery  of  a  bond 
and  mortgage.  The  suggestion  of  a  future  transfer  is  not  imma- 
nent in  the  transaction.  It  is  not  more  immanent  in  the  dehvery 
of  a  bond  and  mortgage  than  in  the  delivery  of  a  horse.  The  law 
of  stock  certificates  has  been  developed  in  view  of  their  character 
as  commercial  instruments,  designed  by  their  very  form,  when  in- 
dorsed in  blank,  to  be  freely  accepted  in  the  market.  (Bank  v. 
Lanier,  11  Wall.  369,  377;  Nat.  S.  D.  S.  &  T.  Co.  v.  Hibbs,  supra; 
Am.  Ex.  Nat.  Bank  v.  Woodlawn  Cemetery,  194  N.  Y.  116.)  They 
are  issued  in  the  expectation  that  they  will  be  "used  in  the  ordi- 
nary channels  of  business,  and  be  relied  upon  as  evidence  of  owner- 
ship or  security  for  advances."  Those  thus  trusting  to  them  and 
affected  by  them  "are  not  accidentally  injured,"  but  have  done 
W'hat those  who  issued  the  certificate  "had  every  reason  to  expect." 
(Bank  of  Batavia  v.  N.  Y.,  L.  E.  d^  W.  R.  R.  Co.,  supra.)  There 
is  Httle  analogy  between  a  commercial  document  with  an  indorse- 
ment which,  by  commercial  usage,  is  an  invitation  to  purchase  it, 
and  a  bond  and  mortgage  unaccompanied  by  any  instrument  of 
transfer.     {Rapps  v.  Gottlieb,  142  N.  Y.  164.) 

Our  conclusion  is  that  the  title  of  the  elder  Stainton  has  never 
been  divested. 

The  judgment  should  be  affirmed,  with  costs. 

WiLLARD  Bartlett,  Ch.  J.,  Werner,  Hiscock,  Chase,  Collin 
and  Miller,  JJ.,  concur. 

Judgment  affirmed. 


CHAPTER  II 

SECURITY 

Section  I. — Mortgage  and  Conditional  Sale 

ST.   JOHN  V.   WAREHAM 

Court  of  Chancery,  1635 

(3  Swanst.  631) 

The  defendants,  for  3000/.,  conveyed  the  lands  to  Sir  Richard 
Grobhaniand  his  heirs;  Sir  Richard  made  a  lease  to  Wareham,  ren- 
dering  toliim  and  his  heirs  230/.  per  annum,  and  this  lease  was 

"-fOTsevenyears,  with  a  nomine  poe7ice  distress  and  clause  of  re-entry  ^^  /\ 

"and_j^XOYiso,  that  if  Wareham  and  his  heirs  should  within  seven 
years  be  desirous  to  repurchase,  and  signify  the  same  to  Sir  RicharT_ 

l^roBKam,  his  heirs  and  assigns,  and  pay  them  3000/.,  then  he^nd 
tEey'  to  assure  to  Wareham.  Lord  Coventry,  Richardson,  Chief 
Justice,  and  Crook,  dej;reed  the  money  to  the  heir  of  Sir  Richard  G.. 
and  not  to  the  plaintiff,  Saint  John,  who  was  his  executor,  and 
justly;  for  this  was  not  the  case  of  a  mortgage,  but  of  an  absolute 
"purchase;  for  the  proviso  could  not  turn  it  to  a  mortgage,  but  w-as 
a  merejjollateral  agreement,  for  which  there  was  no  remedy  in 
equity  after  the  seven  years.  And  so  it  was  ruled  in  this  court,  16 
Car?  2,  Cage  v.  Sir  Ralph  Bovy;  and  again,  T.  24  Car.  2,  in  Isaac 
Cottingion  v.  Lord  Cornhury,  where  the  covenant  was  to  reconvey.  ^ 
upon  the  repayment  of  the  purchase  money  within  seven  years. 
But  if  the  purchase  money  had  not  been  near  the  value  of  the  land, 

..Jjiat  and  such  like  circumstances  might  have  made  it  a  mort; 
gage.— Per  Lord  Nottingham,  L.  Ch..  in  Thornhorough  v.  Baker, 
3  Swanst.  628.^ 

1  And  see,  Melhr  v.  Lees,  2  Atk.      494  (1742);  Longuet  v.  Scaiuen,  1  Ves. 

Sr.  402,  405  (1749). 

139 


140  SECURITY 

CONWAY   V.  ALEXANDER 

Supreme  Court  of  the  United  States,  1812 

(7  Cranch,  218) 

This  was  an  appeal  from  the  Circuit  Court  for  the  District  of 
Columbia,  sitting  in  Chancery,  at  Alexandria.^ 

Marshall,  Ch.  J.,  delivered  the  opinion  of  the  Court  as  follows: 
I  This  suit  was  brought  by  Walter  S.  Alexander,  as  devisee  of 
jKobert  Alexander,  to  redeem  certain  lands  lying  in  the  neighbor- 
mood  of  Alexandria,  which  were  conveyed  by  Robert  Alexander,  in 
[trust,  by  deed  dated  the  20th  of  March,  1788,  and  which  were 
Vifterwards  conveyed  to  William  Lyles,  and  by  him  to  the  testator 
pf  the  plaintiffs  in  error. 

'  The  deed  of  the  20th  of  March,  1788,  is  between  Robert  Alexan- 
der of  the  first  part,  William  Lyles  of  the  second  part,  and  Robert 
T.  Hooe,  Robert  Muire  and  John  Alhson  of  the  third  part.  Robert 
Alexander,  after  reciting  that  he  was  seised  of  one  undivided 
moiety  of  400  acres  of  land,  except  40  acres  thereof  previously  sold 
to  Baldwin  Dade,  as  tenant  in  common  with  Charles  Alexander, 
in  consideration  of  eight  hundred  pounds  paid  by  William  Lyles, 
and  of  the  covenants  therein  mentioned,  grants,  bargains  and  sells 
twenty  acres,  part  of  the  said  undivided  moiety,  to  William  Lyles, 
his  heirs,  and  assigns  forever,  and  the  residue  thereof,  except  that 
which  had  been  previously  sold  to  Baldwin  Dade,  to  the  said 
Robert  T.  Hooe,  Robert  Muire  and  John  Allison,  in  trust,  to  con- 
vey the  same  to  William  Lyles  at  any  reasonable  time  after  the 
first  day  of  July,  1790,  unless  Robert  Alexander  shall  pay  to  the 
said  William  Lyles,  on  or  before  that  day,  the  sum  of  £700  with 
interest  from  the  said  20th  day  of  March,  1788.  And  if  the  said 
Robert  Alexander  shall  pay  the  said  W^illiam  Lyles  on  or  before 
that  day  the  said  sum  of  £700  with  interest,  then  to  reconvey  the 
same  to  the  said  Robert  Alexander.  Robert  Alexander  further 
covenants  that,  in  the  event  of  a  reconveyance  to  him,  the  said 
twenty  acres  sold  absolutely  shall  be  laid  off  adjoining  the  tract 
of  land  on  which  William  Lyles  then  lived.  The  trustees  covenant 
to  convey  to  William  Lyles,  on  the  non-payment  of  the  said  sum  of 
£700;  and  to  reconvey  to  Robert  Alexander  in  the  event  of  pay- 
ment.    Robeit  Alexander  covenants  for  further  assurances  as  to 

'  The  statement  of  facts  is  omitted. 


CONWAY    V.    ALEXANDER  141 

the  140  acres,  and  warrants  the  twenty  acres  to  William  Lyles 
and  his  heirs. 

On  the  19th  day  of  July,  1790,  the  trustees,  by  a  deed  in  which! 
the  trust  is  recited,  and  that  Robert  Alexander  has  failed  to  pay  the  I 
said  sum  of  £700,  convey  the  said  land  in  fee  to  William  Lyles.    On  ' 
the  23d  of  August,  1790,  William  Lyles,  in  consideration  of  £900, 
conveyed  the  said  twenty  acres  of  land  and  140  acres  of  land  to 
Richard  Conway,  with  special  warranty  against  himself  and  his 
heirs.    On  the  9th  day  of  April,  in  the  year  1791,  a  deed  of  partial 
partition  was  made  between  Richard  Conway  and  Charles  Alex- 
ander.    This  deed   shows  that   Charles  Alexander  asserted   an 
exclusive  title  in  himself  to  a  considerable  part  of  this  land.    Soon 
after  this  deed  of  partition  was  executed  Richard  Conway  entered 
upon  a  part  of  the  lands  assigned  to  him,  and  made  on  them  per- 
manent improvements  of  great  value  and  at  considerable  expense. 

In  January  or  February,  1793,  Robert  Alexander  departed  this 
life,  having  first  made  his  last  will  in  writing,  in  which  he  devises 
the  land  sold  to  Baldwin  Dade;  but  does  not  mention  the  land  sold 
to  William  I.yles.  The  plaintiff,  who  was  then  an  infant,  and  who 
attained  his  age  of  twenty-one  years  in  November,  1803,  brought 
his  bill  to  redeem  in  1807.  He  claims  under  the  residuary  clause 
of  Robert  Alexander's  will. 

The  question  to  be  decided  is  whether  Robert  Alexander,  by  his*^ 
deed  of  March,  1788,  made  a  conditional  sale  of  the  property  con-   J 
veyed  by  that  deed  to  trustees,  which  sale  became  absolute  by  the    ^ 
non-payment  of  £700,  with  interest,  on  the  1st  of  July,  1790,  and 
by  the  conveyance  of  the  19th  of  that  month,  or  is  to  be  considered 
as  having  only  mortgaged  the  property  so  convej^ed. 

To  deny  the  power  of  two  individuals,  capable  of  acting  for 
themselves,  to  make  a  contract  for  the  purchase  and  sale  of  lands 
defeasible  by  the  payment  of  money  at  a  future  day,  or,  in  other 
words,  to  make  a  sale  with  a  reservation  to  the  vendor  of  a  right 
to  repurchase  the  same  land  at  a  fixed  price  and  at  a  specified  time, 
would  be  to  transfer  to  the  Court  of  Chancery,  in  a  considerable 
degree,  the  guardianship  of  adults  as  well  as  of  infants.  Such  con- 
tracts are  certainly  not  prohibited  either  by  the  letter  or  the  policy 
of  the  law.  But  the  policy  of  the  law  does  prohibit  the  conversion 
of  a  real  mortgage  into  a  sale.  And  as  lenders  of  money  are  less 
under  the  pressure  of  circumstances  which  control  the  perfect  and 
free  exercise  of  the  judgment  than  borrowers,  the  effort  is  fre- 
quently made  by  persons  of  this  description  to  avail  themselves 
of  the  advantage  of  this  superiority,  in  order  to  obtain  inequitahle 


142  SECURITY 

advantages.  For  this  reason  the  leaning  of  courts  has  been  against 
them,  and  doubtful  cases  have  generally  been  decided  to  be  mort- 
gages. But  as  a  conditional  sale,  if  really  intended,  is  valid,  the 
inquiry  in  every  case  must  be,  whether  the  contract  in  the  specific 
case  is  a  security  for  the  repayment  of  money  or  an  actual  sale. 

In  this  case  the  form  of  the  deed  is  not  in  itself  conclusive  either 
way.  The  want  of  a  covenant  to  repay  the  money  is  not  complete 
evidence  that  a  conditional  sale  was  intended,  but  is  a  circum- 
stance of  no  inconsiderable  importance.  If  the  vendee  must  be 
restrained  to  his  principal  and  interest,  that  principal  and  interest 
ought  to  be  secured.  It  is,  therefore,  a  necessary  ingredient  in  a 
mortgage  that  the  mortgagee  should  have  a  remedy  against  the 
person  of  the  debtor.  If  this  remedy  really  exists,  its  not  being 
reserved  in  terms  will  not  affect  the  case.  But  it  must  exist  in 
order  to  justify  a  construction  which  overrules  the  express  words 
of  the  instrument.  Its  existence,  in  this  case,  is  certainly  not  to 
be  collected  from  the  deed.  There  is  no  acknowledgment  of  a  pre- 
existing debt,  nor  any  covenant  for  repayment.  An  action  at  law 
for  the  recovery  of  the  money  certainly  could  not  have  been  sus- 
tained; and  if,  to  a  bill  in  chancery  praying  a  sale  of  the  premises, 
and  a  decree  for  so  much  money  as  might  remain  due,  Robert 
Alexander  had  answered  that  this  was  a  sale  and  not  a  mortgage, 
clear  proof  to  the  contrary  must  have  been  produced  to  justify  a 
decree  against  him. 

That  the  conveyance  is  made  to  trustees  is  not  a  circumstance  of 
much  weight.  It  manifests  an  intention  in  the  drawer  of  the  in- 
strument to  avoid  the  usual  forms  of  a  mortgage,  and  introduces 
third  persons,  who  are  perfect  strangers  to  the  transaction,  for  no 
other  conceivable  purpose  than  to  entitle  William  Lyles  to  a  con- 
veyance subsequent  to  the  non-payment  of  the  £700  on  the  day 
fixed  for  its  payment,  which  should  be  absolute  in  its  form.  This 
intention,  however,  would  have  no  influence  on  the  case,  if  the 
instrument  was  really  a  security  for  money  advanced  and  to  be  re- 
paid. 

It  is  also  a  circumstance  which,  though  light,  is  not  to  be  entirely 
disregarded,  that  the  twenty  acres,  which  were  admitted  to  be  pur- 
chased absolutely,  were  not  divided  and  conveyed  separately.  It 
would  seem  as  if  the  parties  considered  it  at  least  possible  that  a 
division  might  be  useless. 

Having  made  these  observations  on  the  deed  itself  the  Court 
will  proceed  to  examine  those  extrinsic  circumstances  which  are  to 
determine  whether  it  is  to  be  construed  a  sale  or  a  mortgage. 


CONWAY    V.   ALEXANDER  143 

It  is  certain  that  this  deed  was  not  given  to  secure  a  pre-existing 
debt.  The  connection  between  the  parties  commenced  with  this 
transaction.  The  proof  is  also  complete  that  there  was  no  nego- 
tiation between  the  parties  respecting  a  loan  of  money;  no  propo- 
sition ever  made  respecting  a  mortgage.  The  testimony  on  this 
subject  is  from  Mr.  Lyles  himself  and  from  Mr.  Charles  Lee. 
There  is  some  contrariety  in  their  testimony,  but  they  concur  in 
this  material  point.  Mr.  Lyles  represents  Alexander  as  desirous  of 
selling  the  whole  land  absolutely,  and  himself  as  wishing  to  decline 
an  absolute  purchase  of  more  than  twenty  acres.  Mr.  Lee  states 
Lyles  as  having  represented  to  him  that  Alexander  was  unwilling 
to  sell  more  than  twenty  acres  absolutely,  and  offered  to  sell  the 
residue  conditionally.  There  is  not,  however,  a  syllable  in  the 
cause,  intimating  a  proposition  to  borrow  money  or  to  mortgage 
property.  No  expression  is  proved  to  have  ever  fallen  from  Robert 
Alexander  before  or  after  the  transaction  respecting  a  loan  or  a 
mortgage.  He  does  not  appear  to  have  imagined  that  money  was 
to  be  so  obtained;  and  when  it  became  absolutely  necessary  to  i-aise 
money,  he  seems  to  have  considered  the  sale  of  property  as  his 
only  resource.  To  this  circum.stance  the  Court  attaches  much  im- 
portance. Had  there  been  any  treaty,  any  conversation  respecting 
a  loan  or  a  mortgage,  the  deed  might  have  been,  with  more  reason, 
considered  as  a  cover  intended  to  veil  a  transaction  differing  in 
reality  from  the  appearance  it  assumed.  But  there  was  no  such 
conversation.  The  parties  met  and  treated  upon  the  ground  of  sale 
and  not  of  mortgage. 

It  is  not  entirety  unworthy  of  notice  that  William  Lyles  was  not 
a  lender  of  money,  nor  a  man  who  was  in  the  habit  of  placing  his 
funds  beyond  his  reach.  This,  however,  has  not  been  relied  upon, 
because  the  evidence  is  admitted  to  be  complete  that  Lyles  did  not 
intend  to  take  a  mortgage.  But  it  is  insisted  that  he  intended  to 
take  a  security  for  money,  and  to  avoid  the  equity  of  redemption; 
an  intention  which  a  Court  of  Chancery  will  invariably  defeat. 
His  not  being  in  the  practice  of  lending  money  is  certainh'  an  ar- 
gument against  his  intending  this  transaction  as  a  loan,  and  the 
evidence  in  the  cause  furnishes  strong  reason  for  the  opinion  that 
Robert  Alexander  himself  did  not  so  understand  it.  In  this  view 
of  the  case  the  proposition  made  to  Lyles,  being  for  a  sale  and  not 
for  a  mortgage,  is  entitled  to  great  consideration.  There  are  other 
circumstances,  too,  which  bear  strongly  upon  this  point. 

The  case,  in  its  own  nature,  furnishes  intrinsic  evidence  of  the 
improbability  that  the  trustees  would  have  conveyed  to  William 


144  SECURITY 

Lyies  without  some  communication  with  Robert  Alexander.  They 
certainly  ought  'to  have  known  from  himself,  and  it  was  easy  to 
procure  the  information,  that  the  money  had  not  been  paid.  If  he 
had  considered  this  deed  as  a  mortgage  he  would  naturally  have 
resisted  the  conveyance,  and  it  is  probable  that  the  trustees  would 
have  declined  making  it.  This  probabiHty  is  very  much  strength- 
ened by  the  facts  which  are  stated  by  Mr.  Lee.  The  declaration 
made  to  him  by  Lyles,  after  having  carried  the  deed  drawn  by  Mr. 
Lee  to  Mr.  Hooe,  that  the  trustees  were  unwilling  to  execute  it 
until  the  assent  of  Alexander  could  be  obtained,  and  the  directions 
given  to  apply  for  that  assent,  furnish  strong  reasons  for  the 
opinion  that  this  assent  was  given. 

It  is  also  a  very  material  circumstance  that,  after  a  pubUc  sale 
from  Lyles  to  Conway,  and  a  partition  between  Conway  and 
Charles  Alexander,  Conway  took  possession  of  the  premises,  and 
began  those  expensive  improvements  which  have  added  so  much 
to  the  value  of  the  property.  These  facts  must  be  presumed  to 
have  been  known  to  Robert  Alexander.  They  passed  within  his 
view.  Yet  his  most  intimate  friends  never  heard  him  suggest  that 
he  retained  any  interest  in  the  land.  In  this  aspect  of  the  case,  too, 
the  will  of  Robert  Alexander  is  far  from  being  unimportant.  That 
he  mentions  forty  acres  sold  to  Baldwin  Dade,  and  does  not  men- 
tion one  hundred  and  forty  acres,  the  residue  of  the  same  tract, 
can  be  ascribed  only  to  the  opinion  that  the  residue  was  no  longer 
his. 

This,  then,  is  a  case  in  which  there  was  no  previous  debt,  no  loan 
in  contemplation,  no  stipulation  for  the  repayment  of  the  mone^' 
advanced,  and  no  proposition  for  or  conversation  about  a  mort- 
gage. It  is  a  case  in  which  one  party  certainly  considered  himself 
as  making  a  purchase,  and  the  other  appears  to  have  considered 
himself  as  making  a  conditional  sale.  Yet  there  are  circumstances 
which  nearly  balance  these,  and  have  induced  much  doubt  and 
hesitation  in  the  mind  of  some  of  the  court. 

The  sale,  on  the  part  of  Alexander,  was  not  completely  volun- 
tary. He  was  in  jail  and  was  much  pressed  for  a  sum  of  money. 
Though  this  circumstance  does  not  deprive  a  man  of  the  right  to 
dispose  of  his  property,  it  gives  a  complexion  to  his  contracts, 
and  must  have  some  influence  in  a  doubtful  case.  The  very  fact 
Jthat  the  sale  was  conditional  implies  an  expectation  to  redeem.  A 
conditional  sale  made  in  such  a  situation  at  a  price  bearing  no  pro- 
portion on  the  value  of  the  property  would  bring  suspicion  on  the 
whole  transaction.     Xhe  excessive  inadequacy  of  price  would  in 


COYLE    V.    DAVIS 


145 


itself,  in  the  opinion  of  some  of  the  judges,  furnish  irresistibly 
^prooTth^rasale  could  not  have  been  intended^  If  lands  were  sold 
Tt"£5  per  acre  conditionally,  which,  in  fact,  were  worth  £15,  or 
£20,  or  £50  per  acre,  the  evidence  furnished  by  this  fact,  that  only 
a  security  for  money  could  be  intended,  would  be,  in  the  opinion 
of  three  judges,  so  strong  as  to  overrule  all  the  opposing  testimony 
in  the  cause. 

But  the  testimony  on  this  point  is  too  uncertain  and  conflicting 
to  prevail  against  the  strong  proof  of  intending  a  sale  and  pur- 
chase, which  was  stated.  The  sales  made  by  Mr.  Dick  and  IMr. 
Hartshorne  of  lots  for  building,  although  of  land  more  remote 
from  the  town  of  Alexandria  than  that  sold  to  Lyles,  may  be  more 
valuable  as  building  lots,  and  may  consequently  sell  at  a  much 
higher  price  than  this  ground  would  have  commanded.  The  rela- 
tive value  of  property  in  the  neighborhood  of  a  town  depends  on 
so  many  other  circumstances  than  mere  distance,  and  is  so  different 
at  different  times,  that  these  sales  cannot  be  taken  as  a  sure  guide. 
That  twenty  acres,  part  of  the  tract,  were  sold  absolutely  for  £5  per 
acre;  that  Lyles  sold  to  Conway  at  a  very  small  advance;  that  he 
had  previously  offered  the  property  to  others  unsuccessfully;  that 
it  was  valued  by  several  persons  at  a  price  not  much  above  what 
he  gave;  that  Robert  Alexander,  although  rich  in  other  property, 
made  no  effort  to  relieve  this,  are  facts  which  render  the  real  value, 
at  the  time  of  sale,  too  doubtful  to  make  the  inadequacy  of  jirice  a 
circumstance  of  sufficient  weight  to  convert  this  deed  into  a  mort- 
gage. 

It  is,  therefore,  the  opinion  of  the  Court  that  the  decree  of  the 
Circuit  Court  is  erroneous  and  ought  to  be  reversed,  and  that  the 
cause  be  remanded  to  that  court  with  directions  to  dismiss  the 

bill.^ 

Decree  reversed. 

CoYLE  v.  Davis,  116  U.  S.  108  (1885).  "The  volume  of  proof 
taken  on  the  issue  thus  raised  is  large,  and  the  evidence  is  contra- 
dictory, as  is  common  in  such  cases  where,  admittedly,  a  loan  of 
some  kind  was  at  some  time  talked  about.  The  conveyance  to 
Davis  of  the  undivided  one-third  interest  of  doyter^eTnrto*him. 
his  heirs  and  assigns  forever,  with  a  covenant  of  warranty,  and 
^without  a  defeasance,  either  in  the  conveyance  or  in^ collateral 

iSee  also  Robinson  v.  Cropsey,  2  Hall,  22  Mich.  377  (1871);  Hanfnrd 
Edw.  Ch.  (N.  Y.)  1.38  (lS33)i  ffir/^  v.  v.  Blessing,  80  III.  188  {\S7  5);  Ran  chill 
Doane,  35  Vt.  125  (1862);  Cornell  v.      v.  Sanders,  87  N.  Y.  578  (1882). 


146  SECURITY 

paper — the  parol  evidence  that  there  was  a  debt,  and  that  the  deed 
was  intended  to  secure  it  and  to  operate  only  as  a  mortgage,  must 
be  clear,  unequivocal  and  convincing,  or  the  presumption  that  the 
instrument  is  what  it  purports  to  be  must  prevail.  This  well- 
settled  rule  of  equity  jurisprudence  was  applied  by  this  court  in 
Howland  v.  Blake,  97  U.  S.  624,  626.  The  case  stated  in  the  bill 
herein  is  not  supported  by  the  weight  of  evidence.  On  the  con- 
trary, it  sustains  the  allegations  of  the  answer.  Especially,  the 
force  of  the  letter  of  Coyle  to  Davis,  of  June  11,  1867,  is  not  broken 
by  any  satisfactory  explanation.  It  would  serve  no  useful  purpose 
to  discuss  the  testimony  at  length.  There  is  but  one  point  to  which 
it  is  needful  to  refer.  Great  stress  is  laid,  in  cases  of  this  kind,  on 
inadequacy  of  consideration  where  there  is  a  considerable  dispro- 
portion between  the  price  paid  and  the  real  value  of  the  property. 
(Russell  V.  Southard,  12  How.  139,  148.)  There  is  testimony  on 
both  sides,  on  the  question  of  disproportion,  in  this  case.  But  the 
preponderance  is  very  large  on  the  part  of  Davis,  that  the  share  of 
Coyle  in  the  property  was  sold  for  about  its  sale  value,  in  view  of 
its  condition.  There  was  a  poorly  built  and  poorly  arranged  build- 
ing on  the  premises,  which  was  incapable  of  actual  partition;  the 
law  did  not  permit  a  partition  by  a  sale  in  invitum,  and  Coyle's 
interest  was  a  minority  interest.  These  considerations  made  it 
difficult  of  sale  at  all." — Per  Blatchford,  J. 


RUSSELL  V.   SOUTHARD 

Supreme  Court  of  the  United  States,  1851 

(12  How.  139) 

Ttt^""*"^*^*^!!  rirr^''^  fjj^m-the  Circuit  •Coml^f  the^Uaited"^tates 
for  the  District  of  Kentucky,  sitting  as  a  courtof  ecmitv. 

It  was  a  bill  filed  by  RusseliPLliti  appiillantTto  redeem  what  he 
called  a  mortgage,  and  the  question  in  the  case  was  whether  it  was 
a  mortgage  or  conditional  sale.  The  facts  are  set  forth  in  the  opin- 
ion of  the  court.  Upon  the  trial  the  Circuit  Court  dismissed  the 
bill,  and  Russell  appealed  to  this  court. 

Mr.  Justice  Curtis  delivered  the  opinion  of  the  court.  ^ 

This  is  a  suit  in  equity  to  redeem  a  mortgage,  brought  here  by 

appeal  from  the  Circuit  Court  of  the  United  States  for  the  District 

of  Kentucky. 

^  Portions  of  the  opinion  have  been  omitted. 


RUSSELL   V.    SOUTHARD  147 

On  the  24th  day  of  September,  1827,  Russell,  the  complainant,/ 
conveyed,  by  an  absolute  deed  in  fee-simple,  to  James  Southardjj 
deceased,  whose  brother  and  devisee,  Daniel  R.  Southard,  is  th( 
principal  party  defendant  in  this  bill,  a  farm,  containing  two  hun-l 
dred  and  sixteen  acres,  situated  about  two  miles  from  the  city  oi 
Louisville.  At  the  time  the  deed  was  delivered,  and  as  part  of  the] 
same  transaction.  Southard  gave  to  Russell  a  memorandum,  the] 
terms  of  which  are  as  follows: 

"Gilbert  C.  Russell  has  sold  and  this  day  absolutely  conveyed 
to  James  Southard,  said  Russell's  farm  near  Louisville,  and  the 
tract  of  land  belonging  to  said  farm,  containing  two  hundred  and 
sixteen  acres,  and  the  possession  thereof  actually  delivered  on  the 
following  terms,  for  the  sum  of  $4929.81 3^  cents,  which  has  been 
paid  and  fully  discharged  by  the  said  Southard  as  follows,  viz., 
first  two  thousand  dollars,  money  of  the  United  States,  paid  in 
hand ;  secondly,  the  transfer  of  a  certain  claim  in  suit  in  the  Jeffer- 
son Circuit  Court,  Kentucky,  in  the  name  of  James  Southard 
against  Samuel  M.  Brown  and  others,  now  amounting  to  the  sum 
of  $1558.87 J^;  and  thirdly,  the  transfer  of  another  claim  in  the 
same  court,  in  the  name  of  Daniel  R.  Southard  against  James  C. 
Johnston  and  others,  now  amounting  to  the  sum  of  $1270.94,  as  by 
reference  to  the  records  for  the  more  precise  amounts  will  more 
fully  appear.  The  said  Gilbert  C.  Russell  has  taken,  and  doth 
hereby  agree  to  receive  from  said  Southard  aforesaid,  two  claims 
against  Brown,  &c.,  and  James  C.  Johnston,  &c.,  as  aforesaid, 
without  recourse  in  any  event  whatever  to  the  said  James  South- 
ard, or  his  assignor,  Daniel  R.  Southard,  of  the  claim  of  said  Johns- 
ton, &c.,  or  either,  and  to  take  all  risk  of  collection  upon  himself, 
and  make  the  best  of  said  claim  he  can.  The  said  James  Southard 
agrees  to  resell  and  convey  to  the  said  Russell  the  said  farm  and 
two  hundred  and  sixteen  acres  of  land,  for  the  sum  of  forty-nine 
hundred  and  twenty-nine  [dollars]  813^  cents,  payable  four  months 
after  the  date  hereof,  with  lawful  interest  thereon  from  this  date. 
And  the  said  Russell  agrees,  and  binds  himself,  his  hell's,  &c.,  that 
if  the  said  sum  and  interest  be  not  paid  to  the  said  James  South- 
ard, or  his  assigns,  at  the  expiration  of  four  months  from  this  date^ 
that  then  this  agreement  shall  be  at  an  end,  and  null  and  void;  and 
the  wife  of  said  Russell  shall  relinquish  her  dower  within  a  reason- 
able time  as  per  agreement  of  this  date.  This  agreement  of  resale 
by  the  said  James  Southard  to  the  said  Russell,  is  conditional  and 
without  a  valuable  consideration,  and  entirely  dependent  on  the 
payment,  on  or  before  the  expiration  of  four  months  from  and 


148  SECURITY 

after  the  date  hereof,  of  the  said  sum  of  $4929.813^,  and  interest 
thereon  from  this  date  as  aforesaid.  And  this  agreement  is  to  be 
vaHd  and  obHgatory  only  upon  the  said  James  Southard,  upon  the 
punctual  payment  thereof  of  the  sum  and  interest  as  aforesaid,  by 
the  said  Gilbert  C.  Russell. 

"In  witness  whereof  the  parties  aforesaid,  have  hereunto  set  their 
hands  and  seals,  at  Louisville,  Kentucky,  on  this  24th  day  of  Sep- 
tember, 1827. 

"Gilbert  C.  Russell,     [Seal.] 
"James  Southard,  [Seal.] 

"Witness  present,  signed  in  duplicate — 
J.  C.  Johnston." 

The  first  question  is  whether  this  transaction  was  a  mortgage, 
or  a  sale.  .  .  . 

The  deed  and  memorandum  certainly  import  a  sale;  the  ques- 
tion is,  if  their  form  and  terms  were  not  adopted  to  veil  a  transac- 
tion differing  in  reality  from  the  appearance  it  assumed? 

In  examining  this  question  it  is  of  great  importance  to  inquire 
whether  the  consideration  was  adequate  to  induce  a  sale.  WherL 
no  fraud  is  practised,  and  no  inequitable  advantages  taken  of 
pressing  wants,  owners  of  property  do  not  sell  it  for  a  considera- 
tion manifestly  inadequate,  and,  therefore,  in  the  cases  on  this 
subject  great  stress  is  justly  laid  upon  the  fact  that  what  is  alleged 
to  have  been  the  price  bore  no  proportion  to  the  value  of  the  thing 
said  to  have  been  sold.  {Conway  v.  Alexander,  7  Cranch,  241; 
Morris  v.  Nixon,  1  How.  126;  Vernon  v.  BetheJl,  2  Eden,  110; 
Oldham  v.  Halley,  2  J.  J.  Marsh.  114;  Edrington  v.  Harper,  3  J.  J. 
Marsh,  354.) 

/  Upon  this  important  fact  the  evidence  leaves  the  court  in  no 
doubt.  The  farm,  containing  216  acres,  was  about  two  miles  from 
Louisville,  and  abutted  on  one  of  the  principal  highways  leading 
to  that  city.  A  dwelling-house,  estimated  to  have  cost  from  $10,- 
000  to  $12,000,  was  on  the  land. 

In  May,  1826,  about  16  months  before  this  alleged  sale,  Russell 
purchased  the  farm  of  John  Floyd,  and  paid  for  it  the  sum  of 
$12,960.  Some  attempt  is  made  to  show,  by  the  testimony  of  Mr. 
Thurston,  that  this  sum  was  not  paid  as  the  value  of  the  land; 
but  what  he  says  upon  this  point  is  mere  conjecture^  deduced  by 
him  from  hearsay  statements,  and  cannot  be  allowed  to  have  any 
weight  in  a  court  of  justice.  There  is  some  conflict  in  the  evi- 
dence respecting  the  state  of  the  fences  and  the  agricultural  con- 


RUSSELL   V.    SOUTIL^RD  149 

dition  of  the  lands  at  the  time  in  question,  but  we  do  not  find 
any  proof  that  the  lands  had  been  permanently  run  down,  or  ex- 
hausted; and  considering  the  price  paid  by  Russell,  and  the  amount 
expended  by  Wing,  his  agent,  during  the  sixteen  months  he  man- 
aged the  farm,  we  think  the  evidence  shows  that,  though  the  fences 
and  buildings  were  not  in  the  best  condition,  yet  their  state  was 
not  such  as  to  detract  largely  from  the  value  of  the  property.  The 
consideration  for  the  alleged  sale  was  $2000  in  cash,  and  the  as- 
signment of  two  claims  then  in  suit,  amounting,  with  the  interest 
.computed  thereon,  to  $2829.81,  not  finally  reduced  to  money  by 
Russell,  till  October,  1830,  upward  of  three  years  after  the  assign- 
ment. Making  due  allowance  for  the  state  of  the  currency  in 
Kentucky  at  that  time,  the  worst  effects  of  which  seem  to  have 
been  then  passing  away,  and  which  must  be  supposed  to  have 
affected  somewhat  the  value  of  the  claims  he  received,  as  well  as  of 
the  property  he  conveyed,  we  cannot  avoid  the  conclusion  that  this 
consideration  was  grossly  inadequate;  and  therefore  we  must  take 
along  with  us,  in  our  investigations,  the  fact  that  there  was  no  real 
proportion  between  the  alleged  price  and  the  value  of  the  prop- 
erty said  to  have  been  sold.  We  have  not  adverted  particularh'  to 
the  opinions  of  witnesses  respecting  the  value  of  the  property,  be- 
cause they  have  not  great  weight  with  the  court,  compared  with  the 
facts  above  indicated;  but  there  is  a  general  concurrence  of  opinion 
that  the  value  of  the  farm  largely  exceeded  the  alleged  price. 

It  appears  that  Russell  had  intrusted  the  care  of  this  farm  to  an 
agent  named  W^ing,  who  had  contracted  debts  for  which  Russell 
had  been  sued,  on  coming  to  Louisville  from  Alabama,  where  he 
resided.  He  was  a  stranger,  without  friends  or  resources  there,  ex- 
cept this  farm,  and  in  immediate  and  pressing  want  of  about  $2000 
in  cash.  Southard,  though  not  proved  to  have  been  a  lender  of 
money  at  usurious  rates  of  interest,  is  shown  to  have  been  possessed 
of  active  capital,  and  not  engaged  in  any  business  except  its  man- 
agement. Russell  certainly  attempted  to  sell  the  farm.  Colonel 
Woolley  testifies, — "Russell  was  anxious  to  sell;  indeed  he  was  im- 
portunate that  I  should  purchase."  And  a  letter  is  produced  by 
the  defendant,  D.  R.  Southard,  written  to  James  Southard,  by 
Wing,  containing  a  proposal  for  a  sale.    The  letter  is  as  follows: 

"Sunday,  Noon. 
"Sir:  Having  had  some  conversation  in  relation  to  Colonel  Rus- 
sell's plantation,  I  will  take  the  liberty  of  submitting  for  your  con- 
sideration, 1st,  how  much  will  you  give  for  the  place,  crops,  stock. 


150  SECURITY 

utensils,  and  implements,  or  how  much  without  the  same,  to  be  paid 
as  follows:  in  one  sixth  cash  in  hand,  the  balance  in  one,  two,  three, 
four,  and  five  equal  annual  instalments,  which  may  be  extinguished 
at  any  time  with  whiskey,  pork,  bacon,  flour,  hemp,  bale  rope,  cot- 
ton bagging,  at  the  New  Orleans  prices  current,  deducting  there- 
from freight  accustomary.  Mules  and  fine  horses  will  now  be  taken 
at  appraised  valuation, 

"Respectfully  yours, 

J.  W.  Wing. 
"Mr.  Southard. 

"N.  B. — Please  leave  an  answer  for  me  at  Allan's,  say  this 
evening.  Yours,  &c., 

J.  W.  W.'* 

It  does  not  appear  that  any  price  was  spoken  of  between  Russell 
and  Colonel  Woolley,  who  peremptorily  refused  to  purchase;  nor 
is  any  sum  of  money  mentioned  in  this  letter  of  Wing;  but,  bear- 
ing in  mind  Russell's  necessity  to  have  $2000  in  cash,  the  offer  to 
take  one-sixth  cash,  and  the  balance  in  one,  two,  three,  four,  and 
five  annual  instalments,  indicates  that  Russell  then  expected  about 
$12,000  for  the  property,  and  had  that  sum  in  view  as  the  price, 
when  these  terms  were  proposed.  This  offer  to  sell  differs  so  widely 
from  the  terms  of  the  written  memorandum,  that  it  certainly  does 
not  aid  in  showing  that  the  actual  transaction  was  a  sale.  Peter 
Wood  testifies  that  he  heard  a  conversation  between  James  South- 
ard and  Colonel  Russell,  about  the  transfer  of  the  farm  from  Rus- 
sell to  Southard,  in  which  Mr.  Southard  proposed  to  advance 
money  to  Russell  upon  the  farm;  that  Russell  told  Southard  about 
what  he  had  paid  for  the  farm,  $13,000  or  $14,000,  and  that  he 
should  consider  it  a  sacrifice  at  $10,000;  but  no  proposal  was  made 
to  give,  or  take,  any  price  for  the  farm.  That  some  time  after^ 
Southard  told  him  he  had  advanced  Russell  between  $4000  and 
$5000  on  the  place,  but  that,  in  case  he  owned  the  place,  it  would 
cost  him  $10,000.  The  general  character  of  this  witness  for  truth 
and  veracity  is  attacked  by  the  defendants,  and  supported  by  the 
plaintiff.  His  credibility  finds  support  in  the  consistency  of  his 
statements  with  the  prominent  facts  proved  in  the  case.  This  is 
all  the  proof  touching  the  negotiations  which  led  to  the  contract; 
but  there  is  some  evidence  bearing  directly  on  the  real  understand- 
ing of  the  parties.  Doctor  Johnston  was  the  subscribing  witness 
to  the  written  memorandum.  He  testifies  that  "James  Southard 
and  Gilbert  C.  Russell,  I  think  on  the  same  day,  presented  the 


RUSSELL   V.    SOUTHARD  151 

agreement,  and  asked  me  to  witness  the  same,  which  I  did.  My 
understanding  of  the  contract  was  both  from  Southard  and  Russell, 
and  my  distinct  impression  is,  that  Russell  was  to  pay  the  money 
in  four  months,  and  take  back  the  farm."  The  intelligence  and 
accuracy,  as  well  as  the  fairness  of  this  witness,  are  not  contro- 
verted; and  if  he  is  believed,  the  transaction  was  a  loan  of  money, 
upon  the  security  of  his  farm.  It  is  the  opinion  of  the  court  that 
such  was  the  real  transaction.  The  amount  and  nature  of  what 
was  advanced,  compared  with  the  value  of  the  farm,  the  testi- 
mony of  Wood  as  to  the  offer  of  Southard  to  make  an  advance  of 
money  on  the  farm,  and  his  subsequent  declaration  that  he  had 
done  so,  and  the  information  given  by  both  parties  to  Doctor 
Johnston,  that  Russell  was  to  pay  the  money  at  the  end  of  four 
months,  present  a  case  of  a  loan  on  security,  and  are  not  overcome 
by  the  answer  of  Southard  and  the  written  memorandum. 

It  is  true,  Daniel  R.  Southard,  answering,  as  he  declares,  from 
personal  knowledge,  sets  out,  with  great  minuteness,  a  case  of 
an  absolute  and  unconditional  sale;  the  written  contract  by  his 
brother  to  reconvey  being,  as  he  says,  a  mere  gratuity  conferred  on 
Russell  the  next  day,  or  the  next  but  one,  after  this  absolute  sale 
and  conveyance  had  been  fully  completed.  But  this  account  of  the 
transaction  is  so  completely  overthrown  by  the  proofs,  that  it  was 
properly  abandoned  by  the  defendants'  counsel,  as  not  maintain- 
able. We  entertain  grave  doubts  whether,  after  relying  on  an  abso- 
lute sale  in  his  answer,  it  is  open  to  him  to  set  up  in  defence  a  con- 
ditional sale;  but  it  cannot  be  doubted,  that  the  least  effect  justly 
attributable  to  such  a  departure  from  the  facts,  is  to  deprive  his 
answer  of  all  weight,  as  evidence,  on  this  part  of  the  case. 

In  respect  to  the  written  memorandum,  it  was  clearly  intended  i 
to  manifest  a  conditional  sale.  Very  uncommon  pains  are  taken/ 
to  do  this.  Indeed,  so  much  anxiety  is  manifested  on  this  pointy 
as  to  make  it  apparent  that  the  draftsman  considered  he  had  a 
somewhat  difficult  task  to  perform.  But  it  is  not  to  be  forgotten, 
that  the  same  language  which  truly  describes  a  real  sale,  may  also 
be  employed  to  cut  off  the  right  of  redemption,  in  case  of  a  loan  on 
security;  that  it  is  the  duty  of  the  court  to  watch  vigilantly  these 
exercises  of  skill,  lest  they  should  be  effectual  to  accomplish  what 
equity  forbids;  and  that,  in  doubtful  cases,  the  court  leans  to  the 
conclusion  that  the  reality  was  a  mortgage,  and  not  a  sale.  (Con- 
way V.  Alexander,  7  Cranch,  218;  Flagg  v.  Mann,  2  Summer,  533; 
Secrest  v.  Turner,  2  J.  J.  Marsh.  471;  Edrington  v.  Harper,  3  J.  J. 
Marsh.  354;  Crane  v.  Bonnell,  1  Green,  Ch.  R.  264;  Robertson  v. 


152  SECURITY 

Camphell,  2  Call.  421 ;  Poindexter  v.  McCannon,  1  Dev.  Eq.  Cas. 
373.) 

It  is  true,  Russell  must  have  given  his  assent  to  this  form  of 
the  memorandum;  but  the  distress  for  money  under  which  he  then 
was,  places  him  in  the  same  condition  as  other  borrowers,  in  numer- 
ous cases  reported  in  the  books,  who  have  submitted  to  the  dicta- 
tion of  the  lender  under  the  pressure  of  their  wants;  and  a  court 
of  equity  does  not  consider  a  consent,  thus  obtained,  to  be  sufficient 
to  fix  the  rights  of  the  parties.  "Necessitous  men,"  says  the  Lord 
Chancellor,  in  Vernon  v.  Bethell,  2  Eden,  113,  "are  not,  truly 
speaking,  free  men ;  but,  to  answer  a  present  emergency,  will  sub- 
mit to  any  terms  that  the  crafty  may  impose  upon  them." 

The  memorandum  does  not  contain  any  promise  by  Russell  to 
repay  the  money,  and  no  personal  security  was  taken;  but  it  is 
settled  that  this  circumstance  does  not  make  the  conveyance  less 
effectual  as  a  mortgage.  (Floyer  v.  Lavington,  1  P.  Wms.  268; 
Lawley  v.  Hooper,  3  Atk.  278;  Scott  v.  Fields,  7  Watts,  360;  Flagg 
v.  Mann,  2  Sumner,  533;  Ancaster  v.  Mayer,  1  Bro.  C.  C.  454.) 
And  consequently  it  is  not  only  entirely  consistent  with  the  con- 
clusion that  a  mortgage  was  intended,  but  in  a  case  where  it 
was  the  design  of  one  of  the  parties  to  clothe  the  transaction  with 
the  forms  of  a  sale,  in  order  to  cut  off  the  right  of  redemption,  it 
is  not  to  be  expected  that  the  party  would,  by  taking  personal 
security,  effectually  defeat  his  own  attempt  to  avoid  the  appear- 
ance of  a  loan. 

I     It  has  been  made  a  question,  indeed,  whether  the  absence  of  the 
Ipersonal  liability  of  the  grantor  to  repay  the  money,  be  a  conclusive 
Itest  to  determine  whether  the  conveyance  was  a  mortgage.     In 
brown  V.  Dewey,  1  Sandf.  Ch.  R.  57,  the  cases  are  reviewed  and  the 
tesult  arrived  at,  that  it  is  not  conclusive.    It  has  also  been  main- 
tained that  the  proviso,  or  condition,  if  not  restrained  by  words 
showing  that  the  grantor  had  an  option  to  pay  or  not,  might  con- 
stitute the  grantee  a  creditor.    (Ancaster  v.  Mayer,  1  Bro.  C.  C. 
464 ;  2  Greenl.  Cruise,  82  n,  3.)    But  we  do  not  think  it  necessary  to 
determine  either  of  these  questions;  because  we  are  of  opinion  that 
in  this  case  there  is  sufficient  evidence  that  the  relation  of  debtor 
and  creditor  was  actually  created,  and  that  the  written  memo- 
randum ascertains  the  amount  of  the  debt,  though  it  contains  no 
promise  to  pay  it.    In  such  a  case  it  is  settled,  that  an  action  of 
assumpsit  will  lie.     (Tilson  v.  Warwick  Gas-Light  Co.,  4  B.  &  C. 
968;  Yates  v.  Aston,  4  Ad.  &  El.  N.  S.  182;  Burnett  v.  Lijnch,  5  B. 
&  C.  589;  Elder  v.  Rouse,  15  Wend.  218).  .  .  . 


MATTHEWS    V.    SHEEHAN  153 

The  conclusion  at  which  we  have  arrived  on  this  part  of  the  case 
is,  that  the  transaction  was,  in  substance,  a  loan  of  money  upon 
the  security  of  the  farm,  and  being  so,  a  court  of  equity  is  bound 
to  look  through  the  forms  in  which  the  contrivance  of  the  lender 
has  enveloped  it,  and  declare  the  conveyance  of  the  land  to  be  a 
mortgage.  .   .  . 

A  decree  is  to  be  entered,  reversing  the  decree  of  the  court  below, 
with  costs,  declaring  that  the  conveyance  from  Russell,  the  com- 
plainant, to  James  Southard,  was  a  mortgage,  and  that  Russell  is 
entitled  to  redeem  the  same,  and  remanding  the  cause  to  the  Cir- 
cuit Court,  with  directions  to  proceed  therein  in  conformit}^  with 
the  opinion  of  this  court  and  as  the  principles  of  equity  shall  re- 
quire.^ 

MATTHEWS  v.   SHEEHAN 

Court  of  Appeals  of  New  York,  1877 

(69  N.  Y.  585) 

Appeal  from  judgment  of  the  General  Term  of  theSupreme 
Court  in  the  third  judicial  dt^pill'LmwU,  "aHirniui^-alJydgment  in 
favor  of  plaintiff  (^ntcrcd  upon  a  verdict. 

Ihis  action  was  brought  1)}'  plaintm,  as  administratrix  with  the 
will  annexed,  of  Dennis  O'Keefe,  deceased,  to  recover  moneys 
alleged  to  have  been  collected  l)y  defendant  upon  a  policy  of  insur- 
ance issued  upon  the  life  of  said  O'Keefe,  and  assigned  by  him  to 
defendant  as  security  for  advances  made  by  the  latter. 

Earl,  J.  In  December,  1869,  an  arrangement  was  made  be- 
tween the  plaintiff's  testator,  O'Keefe,  and  the  defendant,  whereby 
O'Keefe  was  to  procure  a  policy  of  insurance  on  his  life  from  the 
Phoenix'  Life  Insurance  Company,  and  assign  it  to  the  defendant, 
who  was  to  pay  the  premiums  and  have  the  benefit  of  the  policy, 
with  the  understanding  that  if  at  any  time  O'Keefe  desired  to 
redeem  the  policy,  he  could  do  so  by  paying  the  premiums  ad- 
vanced by  defendant,  with  the  interest  thereon.  In  pursuance  of 
this  arrangement,  O'Keefe  procured  the  company  to  issue  a  policy 
on  his  life,  which  was  immediately  assigned  to  the  defendant  by  an 
assignment  absolute  in  form,  and  he  paid  all  the  premiums  to  the 

iSee  Miller  v.  Thomas,  14  111.  428       (1886);  Reich  v.  Cochran,  213  N.  Y. 
(1853);  Bearse  v.   Ford,    108   111.    16       416  (1914). 
(1883);   Vos  v.   Eller,   109   Iml.   260 


154  SECURITY 

time  of  O'Keefe's  death  in  1874.  Before  that  time  O'Keefe,  for 
the  purpose  of  redeeming  the  poHcy,  offered  to  pay  the  defendant 
the  amount  advanced  by  him  for  the  premiums,  and  defendant  re- 
fused to  take  the  money.  After  the  death  of  O'Keefe,  the  defend- 
ant received  from  the  insurance  company  the  amount  insured,  and 
retained  the  same,  refusing,  upon  plaintiff's  demand,  to  pay  any 
portion  thereof  to  her.  This  action  was  brought  to  recover  the 
sum  received  by  the  defendant,  less  the  amount  for  which  he  held 
the  policy  as  security.  Upon  the  trial,  the  facts  above  stated  ap- 
pearing, and  there  being  no  conflicting  evidence,  the  court  directed 
a  verdict  for  the  plaintiff. 

The  verdict  was  properly  directed.  Upon  the  undisputed  evi- 
dence, O'Keefe  had  the  option  to  treat  tlieTTOTTcy  as  a  security  for 
4he  premiums  paid  by  the  defendant,  and  to  redeem  the  same. 
While  O'Keefe  was  not  bound  to  redeem,  or  personally  liable  for 
the  money  advanced  by  the  defendant,  there  was  sufficient  consid- 
eration for  the  arrangement  made.  O'Keefe  submitted  to  exam- 
ination, procured  his  life  to  be  insured,  and  assigned  the  policy  to 
the  defendant  in  consideration  that  the  defendant  would  pay  the 
premiums  and  give  him  the  option  to  redeem.  ,!J]hesubstance  and 
legal  effect  of  the  transaction  was  to  make  the  defendant  amoff- 
gagee  of  the  policy  to  secure  him  for  the  premiums  paid,  an(J  he 
could  not  claim  an  absolute  title  thereto,  except  upon  O'Keefe's" 
failure  to  exercise  his  option  to  redeem.  This  was  not  simply  an 
agreement  l)y  the  defendant  to  sell  to  O'Keefe,  upon  payment  by 
him  of  the  amount  of  the  premiums  advanced  with  interest,  a 
policy  absolutely  belonging  to  the  defendant,  an  agreement  void 
under  the  statute  of  frauds,  because  there  was  no  writing  or  part 
payment.  It  was  an  agreement  that  the  defendant  might  take 
and  hold  the  policy  as  security  and  the  right  to  redeem  attended 
the  policy  into  the  defendant's  hands,  and  at  all  times  affected  his 
title.  Such  an  agreement  may  be  shown  by  parol,  although  the 
assignment  be  absolute  in  form  {Hodges  v.  The  T.  M.  and  Fire 
Ins.  Co.,  8  N.  Y.  416;  Despard  v.  Walbridge,  15  N.  Y.  374;  Horn 
V.  Keteltas,  46  N.  Y.  605;  Hope  v.  Balen,  58  N.  Y.  380). 

It  matters  not  that  O'Keefe  did  not  absolutely  promise  to  pay 
the  amount  which  defendant  should  advance  for  the  premiums. 
To  constitute  a  valid  mortgage  it  is  not  essential  that  the  mort- 
gagee should  have  any  other  remedy  but  that  upon  his  mortgage. 
This  is  recognized  by  the  Revised  Statutes  in  references  to  real 
estate  mortgages  (1  R.  S.  739),  which  provide  that  when  there 
shall  be  no  express  covenant  in  the  mortgage  for  the  payment  of 


MATTHEWS    V.    SHEEHAN  155 

the  money  received,  and  no  bond  or  other  separate  instrument  to 
secure  such  payment,  the  remedies  of  the  mortgagee  shall  be  con- 
fined to  the  lands  mentioned  in  the  mortgage.^  In  all  cases  the 
remedy  of  the  mortgagee  may  by  the  agreement  of  the  parties  be 
confined  to  the  mortgage. 

It  is  sometimes  difficult  to  determine  whether  a  transaction  con-j 
stitutes  a  mortgage  or  an  absolute  sale  and  a  conditional  resale; 
and  whether  it  shall  be  construed  to  be  one  or  the  other  depends 
upon  the  intention  of  the  parties  as  evidenced  by  the  instrument 
executed,  and  all  the  circumstances  of  the  case.  No  general  rule 
upon  the  subject  can  be  laid  down  which  will  govern  all  cases, 
although  it  is  said  that  the  fact  that  there  was  no  debt  which 
could  be  personally  enforced  is  a  strong,  but  not  an  absolutely 
controlling  circumstance,  that  the  transaction  was  not  a  mortgage, 
but  a  sale  and  a  conditional  resale.  Jin  all  ^^^'-^^^^--/^^.c^o  /|  f^piy^n^f  \ 
will  be  construe (  tu  be  a  mortgage  rather  than  a  conditional  sale,^  \ 
because  m  the  case  of  a  mortgage  the  mortgagor,  although  he  has 
not  strictly  complied  with  the  terms  of  the  mortgage,  still  has  his 
right  of  redemption;  while  in  the  case  of  a  conditional  sale,  with- 
out strict  compliance,  the  rights  of  the  conditional  purchaser  are 
forfeited  {Longuet  v.  Scawen,  1  Yes,  Sen.  402;  Glover  v.  Payn, 
19  Wend.  578;  Conway's  Exrs.  v.  Alexander,  7  Cranch,  218;  Edring- 
ton  V.  Harper,  3  J.  J.  Marshall,  354;  Floyer  v.  Lavington,  1  P.  Wms, 
268;  Chapman's  Admin'x  v.  Turner,  1  Colls.  R.  280;  Wharf  v. 
Howell,  5  Binney,  499).  In  Floyer  v.  Lavington,  it  is  said:  "As 
to  the  objection  that  there  was  no  covenant  for  the  payment  of  the 
principal  or  interest,  that  was  not  material;  the  same  not  being 
necessary  for  the  making  of  a  mortgage,  nor  yet  necessary  that  the 
right  should  be  mutual,  viz. :  for  the  mortgagee  to  compel  the  pay- 
ment as  well  as  for  the  mortgagor  to  compel  a  redemption;  since 
such  conveyance,  as  in  the  present  case,  though  without  any  cove- 
nant or  bond  for  the  payment  of  the  money,  would  yet  be  plainly 
a  mortgage."  In  Brown  v.  Dewey,  1  Sandf.  Ch.  R.  56,  it  was  held 
that  "the  absence  of  the  personal  liability  of  the  grantor  to  repay 

1  New  York  Consol.  Laws,  Ch.  50,  remedies  of  the  mortgagee  are  con- 

§249  (Real  Prop.  L.):—"  A  mortgage  fined  to  the  property  mentioned  in 

of  real  property  does  not  imply  a  the  mortgage."     And  see,  Thomas, 

covenant  for  the  pa^^nent  of  the  sum  Mortgages,  3d  Ed.,  §  14. 

intended  to  be  secured;  and  where  '^Accord,  Hughes  v.  Harlam,   166 

such   covenant  is  not  expressed  in  N.  Y.  427.  431,  60  N.  E.  22  (1901); 

the  mortgage,   or  a  bond  or  other  Conover  v.  Palmer,  123  App.  Div.  821, 

separate  instrument  to  secure  such  108  N.  Y.  Supp.  480  (1908). 
payment   has   not  been   given,    the 


156  SECURITY 

the  money  is  not  a  conclusive  test  in  deciding  whether  the  convey- 
ance is  absolute  or  is  intended  as  a  security."  In  Holmes  v.  Grant, 
8  Paige,  243,  257,  Denio,  V.  C,  says:  "It  is  not  essential  that  the 
personal  remedy  against  the  mortgagor  should  be  preserved.  There 
is  a  debt  quoad  the  redemption,  but  not  in  respect  to  the  personal 
remed3^"  In  Flagg  v.  Matin,  14  Pick.  467,  Putnam,  J.,  says: 
"There  was  no  collateral  undertaking  on  the  part  of  Luther  (the 
grantor)  to  pay  the  money  which  Walker  and  Fisher  (grantees) 
should  advance  in  the  five  ^-ears;  so  there  was  no  mutualit3^  And 
this  fact,  though  not  conclusive,  is  to  be  taken  into  consideration 
in  ascertaining  whether  the  transaction  was  a  mortgage,  or  a 
sale  with  a  contract  for  a  repurchase  upon  strict  terms.  (See  also 
Rice  V.  Rice,  4  Pick.  349.)  In  Kerr  v.  Gilmore,  6  Watts,  405,  Ken- 
nedy, J.,  says:  "The  want  of  a  personal  security  for  the  repayment 
of  the  money  has,  taken  in  connection  with  other  circumstances, 
l)een  regarded  as  tending  to  show  that  a  defeasible  purchase  and 
not  a  mortgage  was  intended,  but  this  circumstance  alone  has  never 
been  held  sufficient  to  prevent  a  redemption."  Again,  "that  the 
mortgagee  should  have  a  remedy  against  the  person  of  the  mort- 
gagor also,  in  order  to  make  the  conveyance  a  mortgage,  is  more 
than  I  can  assent  to.  .  .  ."  In  Hoim  v.  Keteltas,  supra,  Allen,  J., 
saj's  that  the  circumstance  that  there  was  no  agreement  to  pay  the 
money  secured  is  one  entitled  to  considerable  weight  in  determin- 
ing whether  a  conveyance  was  intended  as  a  mortgage,  but  that 
it  is  only  one  of  the  circumstances  to  be  considered,  and  not  con- 
clusive; and  Ch.  J.  Marshall,  in  Conway's  Exrs.  v.  Alexander,  7 
Cranch,  218,  says:  "The  want  of  a  covenant  to  repay  the  money 
is  not  complete  evidence  that  a  conditional  sale  was  intended, 
])ut  is  a  circumstance  of  no  inconsiderable  importance." 

It  is  clear,  therefore,  both  upon  principle  and  authority,  that  the 
circumstance  that  O'Keefe  was  not  personall}^  obligated  to  pay  to 
the  defendant  the  amount  of  the  premiums  which  he  should  ad- 
vance is  not  absolutely  controlling  upon  the  question,  whether 
there  was  a  mortgage,  or  a  sale  and  a  conditional  resale.  It  is  an 
important  circumstance  in  such  cases  and,  in  the  conflict  of  evi- 
dence, not  unfrequently  a  controlling  one.  There  are  many  cases, 
some  of  which  are  cited  by  the  learned  counsel  for  the  appellant, 
in  which  it  has  been  held  to  be  not  as  matter  of  law  conclusive,  but 
as  matter  of  fact  decisive.  If  we  should  hold  this  to  be  a  case  of 
conditional  resale,  and  that  the  consequence  follows  which  has 
been  so  learnedly  argued  on  behalf  of  the  defendant,  that  the 
agreement  is  void  under  the  statute  of  frauds,  the  intention  of  the 


MORTON    r.    ALLEN  157 

parties  would  be  defeated.     This  is,  therefore,  a  case  where  the 
court  should  lean  to  hold  the  transaction  to  constitute  a  mortgage, 
~"^ns  giving;  what  Trns  clearly  Intended,  the  li^lit  of  icdeniption. 

There  was  nothiiifi  said  about  a  repurchase  (jr  a  resale,  or  a' 
reassignment,  but  the  right  to  redeem  was  expressly  stipulated. 
The  language  used  shows  that  the  parties  intended  that  the  policy 
should  be  held  as  security  for  the  premiums  paid.  Such  a  con- 
struction is  at  least  as  admissible  as  an}^  other  ^  and  hence  the  court 
did  not  err  in  directing  a  verdict  for  the  plaintiff. 

I  have  treated  the  transaction  as  a  mortgage,  but  it  is  unim- 
portant to  determine  whether  it  was  a  mortgage  or  a  pledge,  as 
the  same  course  of  reasoning  would  apply  and  the  same  conse- 
quences would  follow,  whether  it  was  one  or  the  other.  The  judg- 
ment must  therefore  be  affirmed. 

All  concur. 

Judgment  affirmed.^ 


MORTON  V.   ALLEN 

Supreme  Court  of  Alabama,  1912 

(180  Ala.  279) 

Bill  by  Frank  Allen  against  William  Morton  to  declare  a  deed 
absolute  on  its  face  a  mortgage  and  to  redeem.  From  a  decree 
for  complainant  respondent  appeals.     Affirmed. 

De  Graffenried,  J.  The  bill  of  complaint  in  this  case  was 
filed  by  Frank  Allen  against  William  Morton  for  the  purpose  of 
having  a  conveyance  which  is  absolute  on  its  face,  and  which  was 
made  by  Fra,nk  Allen  to  William  Morton  on  September  6,  1910, 
declared  to  be  a  mortgage,  and  to  redeem.  The  deed  conveys 
certain  real  estate  situate  at  or  near  Boyles  in  Jefferson  County. 
It  recites  a  cash  consideration  of  $6.25  and  the  assumption  by 

1  See  also,  valuable  opinion  of  whether  a  mortgage  or  not,  is  to 
Story,  J.,  in  Flagg  v.  Mann,  2  Sumn.  ascertain  whether  the  conveyance  is 
486  (1837):  "It  has  been  said,  that  a  security  for  the  performance  or 
the  true  test,  whether  the  convey-  non-performance  of  any  act  or  thing, 
ance  in  this  case  was  a  mortgage  or  ■  If  the  transaction  resolve  itself  into 
not,  is  to  ascertain  whether  it  was  a  a  security,  whatever  may  be  its  form, 
security  for  the  payment  of  any  it  is  in  equity  a  mortgage.  If  it  be 
money  or  not.  I  agree  to  that;  and  not  a  security  then  it  may  be  a  con- 
indeed,   in   all   cases  the  true  test,  ditional  or  an  absolute  purchase." 


158  SECURITY 

tlie  grantee,  Morton,  of  a  mortgage  indebtedness  then  existing 
upon  the  property  of  $905.  Frank  Allen  was  residing  upon  the 
property,  which  consisted  of  something  less  than  three  acres,  when 
the  conveyance  was  made,  and  continued  to  reside  there,  occupy- 
ing it  as  his  home,  until  this  bill  was  filed. 

The  deed  is  not  what,  on  its  face,  it  purports  to  be.  As  a  part  of 
the  transaction  which  culminated  in  the  execution  of  the  deed, 
William  Morton  executed  and  delivered  to  Frank  Allen  what  is 
termed  a  'Mease  sale  contract,"  whereby  Morton  agreed  to  lease 
the  property  to  Allen  for  a  period  of  52  months  in  consideration 
of  $6.25  in  cash  paid  by  said  Allen  to  Morton  and  the  further  sum 
of  $1,029,  "divided  into  fifty-two  monthly  payments  of  twenty 
dollars  each  for  the  first  fifty-one  payments,  same  being  evidenced 
by  fifty-one  waive  notes  payable,  the  first  one  October  15,  1910, 
and  each  successive  month  thereafter  until  December  15,  1914, 
and  one  payment  of  nine  dollars  due  by  note  January  15,  1915." 
In  this  "lease  contract"  there  is  a  provision  that  "at  the  end  of 
the  term  if  the  party  of  the  second  part  (Frank  Allen)  has  complied 
with  each  and  all  the  conditions  of  this  lease,  then  the  party  of  the 
first  part  (William  Morton)  agrees  that  the  rent  paid  under  this 
lease  shall  be  considered  a  payment  for  said  property  and  the  party 
of  the  first  part  shall  make  and  execute  a  deed  conveying  said 
property  to  the  party  of  the  second  part."  There  is  also  in  this 
same  "lease  contract"  a  further  provision  that,  if  Frank  Allen 
should  fail  to  comply  with  the  terms  of  the  lease  contract  as  to  the 
payment  of  the  "rent"  notes  as  they  matured,  and  should  become 
as  much  as  two  months  in  arrears  during  the  first  year  of  the  exist- 
ence of  the  lease,  or  as  much  as  three  months  in  arrears  in  such  pay- 
ments at  any  time  thereafter,  or  should  fail  to  pay  the  taxes  on 
said  property  as  it  became  due,  etc.,  then  all  the  money  paid  on 
the  contract  should  be  held  as  rent  for  said  property,  and  the  right 
of  Frank  Allen  to  a  conveyance  of  the  property  should  be  at  an  end. 
We  therefore  have  what  purports — so  far  as  the  face  of  the  deed 
is  concerned — to  be  an  absolute  conveyance  by  Frank  Allen  of 
the  land  to  William  Morton,  but  what  is  not  an  absolute  deed,  but 
a  deed,  which  is  either  a  conditional  conveyance  or  a  mortgage 
to  secure  a  debt. 

Frank  Allen  claims  that  the  deed  and  lease  sale  contract  was,  in 
reality,  a  mortgage  to  secure  an  indebtedness  of  $905  and  the 
interest  thereon.  William  Morton  claims  that  the  transaction 
amounted  to  a  conditional  sale  of  the  property,  and  that  it  was  so 
understood  between  him  and  Frank  Allen  when  the  papers  were 


MORTON    V.    ALLEN  15& 

signed  and  delivered.  If  Allen's  contention  is  correct  then  he  is 
entitled  to  relief.    If  not,  he  is  not. 

(1)  Undoubtedly  a  court  of  equity  will  not  undertake  to  make 
a  contract  for  parties  who  are  sui  juris.  When  two  people  who 
possess  the  legal  capacity  to  contract  actually  make  a  contract, 
if  the  contract  is  not  tainted  with  fraud  and  does  not  contravene 
pubhc  policy,  it  is  the  duty  of  a  court  of  equity,  if  its  powers  are 
properly  invoked  for  that  purpose,  to  enforce  the  contract  in  ac- 
cordance with  its  terms.  A  court  of  equity  has,  however,  when  its 
jurisdiction  is  invoked  in  cases  like  the  present,  the  power  to  as- 
certain what  was,  in  fact,  the  contract  made  by  the  parties,  and  to 
determine  whether  the  writings  truthfully  express  the  actual  agree- 
ment which  they  made. 

Oral  testimony  will  be  resorted  to  for  that  purpose,  and,  while 
nothing  which  rests  within  the  recollection  of  witnesses  can  be 
free  from  all  doubt,  the  court  will,  so  far  as  it  can  do  so,  get  at  the 
truth  of  the  matter,  and,  having  done  that,  if  the  court  cannot 
say  with  reasonable  satisfaction  that  the  writings  evidence  a  con- 
ditional conveyance  of  the  fee  and  were  not  intended  as  a  mort- 
gage, then  the  court  will  always  lean  towards  the  theory  that  the 
writings  were  intended  as  a  mortgage,  "as  that  secures  the  inter- 
ests of  all  parties  and  works  a  hardship  to  none."  Irmin  v.  Cole- 
man, 173  Ala.  175,  55  South.  492. 

The  above  rule  declared  in  Irwin  v.  Coleman,  supra,  seems  iof 
apply  only  in  cases  where  the  controversy  between  the  parties  is 
whether  the  true  contract  as  executed  by  the  parties  was  a  con- 
ditional sale  of  the  lands  or  a  mortgage.  This  rule  does  not  seem 
to  prevail  in  cases  where  the  controversy  is  as  to  whether  the  deed' 
was  in  fact  an  unconditional  sale  of  the  land  or  was  only  intended 
as  a  mortgage  to  secure  a  debt. 

"To  authorize  the  court  to  declare  a  deed  absolute  on  its  face  to 
be  a  mortgage,  it  is  not  sufficient  to  raise  merely  a  doubt  whether 
the  instrument  speaks  the  intention  of  the  parties.  The  court 
must  be  satisfied  by  at  least  a  clear  preponderance  of  the  evidence 
that  a  mortgage  w'as  intended  and  clearly  understood  by  the  grantee 
as  well  as  by  the  grantor.  This  severe  rule  does  not  apply  in  cases 
where  the  writings  express  a  conditional  sale,  or  where  it  is  admitted 
that  there  was  a  contemporaneous  agreement  different  from  that 
expressed  in  the  instrument."  Reeves  v.  Ahercrombie,  108  Ala. 
535,  19  South.  41. 

The  above  italics  are  ours,  and  the  rule  above  declared  author- 
izes this  court  to  weigh  the  evidence  in  this  case  tending  to  show 


IGO  SECURITY 

that  a  mortgage  was  intended  by  the  parties  in  the  light  of  the 
fact  that,  at  the  time  the  paper  which  purported  to  be  an  absolute 
convej^ance  of  the  land  was  executed  and  dehvered,  "there  was  a 
contemporaneous  agreement  different  from  that  expressed  in  the 
instrument,"  and  which  contemporaneous  agreement  conclusively 
shows  that  the  instrument  was  not,  in  truth,  what  it  purported 
to  be,  viz.,  an  absolute  conveyance  of  a  fee-simple  title  to  the  land. 
Such  a  contemporaneous  agreement  must  "have  an  important 
bearing  in  weighing  the  parol  evidence  tending  to  show  that  the 
absolute  conveyance  was  intended  as  a  mortgage."  Reeves  v. 
A  bera'omhie,  supra . 

(2)  It  appears  from  the  evidence  that  Frank  Allen  is  a  man  who 
can  write  his  name,  but  that  he  is  in  fact  uneducated.  He  owned 
the  land  in  controversy  for  several  years  before  the  transaction 
which  brought  about  this  litigation,  and  during  that  period  he 
appears  to  have  built  a  house  on  it,  and  he  was  living  in  that  house 
at  the  time  he  executed  the  papers.  He  seems,  first,  to  have  bor- 
rowed some  money  from  George  Tribble,  who  is  a  brother-in-law 
of  William  Morton.  Tribble,  to  secure  the  loan,  took  from  Allen 
an  absolute  deed  to  the  land  and  gave  back  to  Allen  a  "lease  sale 
contract."  In  other  words,  the  papers  evidencing  the  loan  from 
Tribble  to  Allen  were  similar  in  all  material  respects  to  the  papers 
now  under  consideration,  and  those  papers,  according  to  Tribble's 
own  testimony,  were,  in  fact,  a  mortgage.  William  Morton  was  on 
intimate  social  and  business  terms  with  Tribble,  seems  to  have 
known  of  these  papers,  and  that  they  were  intended  by  the  parties 
and  were  treated  by  them,  as  a  mortgage.  Morton,  in  fact,  seems 
to  have  collected  some  of  this  indebtedness  from  Allen  for  Tribble, 
and  he  also  appears  to  have  become  fully  acquainted  with  Allen's 
land  and  to  have  formed  friendly  relations  with  Allen. 

Finally  Tribble  notified  Allen  that  he  needed  his  money.  Allen 
thereupon  borrowed  from  a  mortgage  company  $905  and  paid 
Tribble  all  that  he  owed  him.  The  debt  to  the  mortgage  company 
was  evidenced  by  three  notes,  one  for  $305,  due  September  4, 
1910;  one  for  $300,  due  September  4,  1911;  and  one  for  $300,  due 
September  4,  1912 — all  bearing  interest  from  date  at  the  rate  of 
8  per  cent,  per  annum.  When  the  first  note  matured,  Allen  ap- 
plied to  Morton  for  a  loan  with  which  to  pay  it.  Allen  claims  that 
Morton  consented  to  make  the  loan,  and  that  the  papers  were 
executed  and  delivered  to  Morton  as  security  for  such  loan,  and 
that  they  were  intended  by  both  him  and  Morton  to  be  a  mort- 
gage, and  only  a  mortgage.    Morton,  on  the  other  hand,  claims 


MORTON    V.    ALLEN 


161 


that  he  told  Allen  that  he  could  not  and  would  not  lend  hmi  the 
money,  that  the  amount  necessary  to  meet  the  debt  of  the  mortgage 
company  was  too  near  the  actual  value  of  the  property  for  him  to 
make  a  loan  upon  it,  that  he  was  willing  to  buy  the  property  from 
him  and  then  lease  it  to  him  at  S20  per  month,  and  that,  if  he  would 
pay  the  rent  and  taxes  promptly,  then  at  the  expiration  of  the  lease 
he  would  deed  the  property  back  to  him.  Morton  claims  that 
Allen  agreed  to  this,  and  that,  with  a  full  and  complete  understand- 
ing of  the  entire  transaction,  Allen  executed  and  delivered  the 
papers. 

There  is  much  dispute  among  the  witnesses  as  to  the  value  of  the 
land  at  the  time  of  the  above  transaction.  We  are  inclined  to 
think  that  there  was  an  increase  in  the  value  of  the  property  after 
Allen  delivered  the  papers  to  Morton;  but  we  are  convinced  that, 
at  the  time  of  the  transaction,  the  property  was  worth  consider- 
able more  than  S6.25  in  cash  and  the  mortgage  for  $905. 

We  therefore  have,  in  this  case,  an  alleged  conditional  sale  of 
lands  with  the  following  facts  existing:  (1)  The  grantor  is  unedu- 
cated. The  grantee  is  uneducated.  The  grantor  appears  to  have 
had  but  little  to  do  with  the  business  world.  The  grantee  appears 
to  be  a  member  of  it.  The  grantor  regards  the  grantee  as  his 
friend.  The  grantor  had  previously  had  a  similar  transaction  with 
the  brother-in-law  of  the  grantee,  and  that  transaction  involved  a 
loan,  a  fact  known  by  the  grantee.  The  papers  now  under  consider- 
ation were  prepared  under  the  supervision  of  the  grantee,  and  said 
papers  are,  in  effect,  duplicates  of  the  papers  which  secured  the 
above  loan  made  by  the  brother-in-law.  (2)  The  lands  were 
worth  considerably  more  than  the  consideration  expressed  in  the 
conveyance  and  were  in  a  section  in  which,  according  to  all  the 
testimony,  the  value  of  land  was  constantly  increasing.  (3)  The 
transaction  was  the  culmination  of  what  was,  admittedly,  at  first, 
a  mere  negotiation  for  a  loan,  and  the  loan  was  applied  for  because 
of  the  friendly  relations  existing  between  the  parties.  (4)  For  a 
recited  cash  consideration  of  $6.25  and  the  assumption  of  a  debt 
which  was  still,  as  between  the  grantor  and  the  mortgage  company, 
binding  on  the  grantor,  the  grantee  becomes  the  owner  of  what  on 
the  face  of  the  conveyance  appears  to  be  the  fee-simple  title  to  the 
land,  but  which  conveyance  was  not,  according  to  the  admitted 
facts,  intended  to  operate  as  an  unconditional  conveyance  of  the 
fee.  (5)  The  grantor  remains  in  possession  of  the  land,  assesses  it 
for  taxes,  and  continues  to  exercise  the  same  rights  over  it  which 
he  had  previously  done.    (6)  The  grantor  testifies  that  the  papers 


162 


SECURITY 


were  intended  by  both  parties  as  a  mortgage,  and  the  grantee 
testifies  that  they  were  not  so  intended.  (7)  The  "lease  sale  con- 
tract" provides  for  the  payment  by  the  grantor  to  the  grantee  of 
$1,035,  a  sum  sufficient  to  meet  the  $905  mortgage  held  by  the 
mortgage  company  on  the  property  and  the  interest  thereon. 

The  above  being  the  situation,  it  is  our  duty — under  the  rule 
that  a  court  of  equity,  in  a  contest  over  the  question  as  to  whether 
a  given  transaction  constituted  a  conditional  sale  of  land  or  a 
mortgage,  to  lean  to  the  theory  that  the  transaction  was  a  mort- 
gage— to  declare  that  the  deed  was  intended  to  be,  and  was  in 
fact,  a  mortgage.  Creivs  v.  ThreadgiU,  35  Ala.  334,  3  Pom.  Eq. 
(3d  Ed.),  §  1195;  Rose  v.  Gandy,  137  Ala.  330,  34  South.  239; 
Ahercrombie  v.  Reeves,  108  Ala.  535, 19  South.  41;  Irmn  v.  Coleman, 
supra ;  1  Jones  on  Mortgages,  §  328. 

The  above  being  our  opinion,  the  decree  of  the  court  below  is. 
affirmed. 

Affir77ied. 

DowDELL,  C.  J.,  and  .Anderson  and  Mayfield,  J  J.,  concur.^ 


SHELDON  V.  McFEE 
buRT  OF  Appeals  of  New  York,  1916 
(216  A^.  Y.  618) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  third  judicial  department,  entered  January  28, 
1914,  aflftrming  a  judgment  in  favor  of  plaintiff  entered  upon  a 
verdict. 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  are 
stated  in  the  opinion. 


Chase,  J.  This  is  an  action  to  recover  damages  for  the  conver- 
t^ion  of  f],  ^^f^  In  April,  1910,  one  Fleming,  then  the  owner  of  the 
safe  and  certain  other  office  furniture,  in  the  city  of  Oneonta,  and 
as  a  part  of  a  transaction  which  included  the  transfer  of  his  inter- 
est in  a  real  estate  and  insurance  business  and  said  safe  and  office 
furniture  to  his  partner.  White,  executed  and  delivered  to  the 


1  The  authorities  on   the  general      note  in  L. 
subject  are  collected  in  an  exhaustive      et  seq. 


R.  A.  1916,  B,  page  18- 


SHELDON   V.    MCFEE 


163 


plaintiff  an  instrument  in  the  form  of  a  bill  of  sale  which  purported, 
for  the  express  consideration  of  one  dollar  and  other  valuable 
considerations,  to  transfer  to  the  plaintiff  the  safe  and  office  furni- 
ture. As  a  part  of  the  transaction  said  WTiite  executed  a  similar 
instrument  to  the  plaintiff  for  the  expressed  consideration  of  8400 
by  which  she  transferred  to  the  plaintiff  certain  household  furni- 
ture. Asa  part  of  the  transaction  White  borrowed  of  the  plaintiff 
$700  and  gave  to  him  a  series  of  promissory  notes  dated  April  15, 
1910,  on  most  of  which  was  indorsed  "Bill  of  Sale,  dated  April  15, 
1910,  on  household  goods  and  office  furniture  to  secure  payment 
of  within  note."  The  bills  of  sale  were  in  fact  given  as  collateral 
security  for  the  payment  of  said  notes  and  each  of  them.  On 
April  29  the  bill  of  sale  from  Fleming  to  plaintiff  was  by  the  plain- 
tiff filed  in  the  office  of  the  clerk  of  the  city  of  Oneonta,  in  which 
city  the  parties  resided.  Some  time  thereafter  White  exchanged 
the  safe  in  question  for  another  safe,  and  the  purchaser  of  the  safe 
in  question  on  the  exchange  of  property  sold  the  same  to  a  person 
who  subsequently  sold  such  safe  to  the  defendants  in  this  action 
who  have  the  possession  thereof.  There  is  default  in  the  paj-ment 
of  a  part  of  the  amount  of  said  loan.  Before  this  action  was  com- 
menced the  plaintiff  demanded  the  possession  of  said  safe  from  the 
defendants  and  it  was  refused. 

All  of  the  questions  of  fact  affecting  the  issues  have  been  passed 
upon  by  a  jury  adversely  to  the  defendants,  and  there  is  some  evi- 
dence on  which  to  base  the  findings  of  the  jury  upon  each  of  the 
questions  submitted  to  it.  There  is  a  question  of  law  presented  i 
for  our  consideration,  and  that  question  is  whether  when  a  bill  of 
sale  absolute  on  its  face,  but  in  fact  intended  to  operate  as  a  mort- 
gage of  goods  and  chattels  is  filed  pursuant  to  the  provisions  of 
article  10  of  the  Lien  Law,  it  is  notice  to  a  subsequent  purchaser 
in  good  faith,  although  there  is  nothing  in  the  instrument  itself 
expressing  such  intention  and  there  is  not  filed  therewith  any  other 
or  further  paper  showing  that  the  sale  was  intended  to  operate 
as  a  mortgage  of  goods  and  chattels. 

We  think  the  question  is  answered  by  the  express  language 
of  the  statute.  It  is  provided  by  section  230  of  the  Lien  Law 
(Cons.  Laws,  ch.  33)  that  "Every  mortgage  or  conveyance  intended 
to  operate  as  a  mortgage  of  goods  and  chattels  .  .  .  which  is  not 
accompanied  by  an  immediate  delivery,  and  followed  by  an  actual 
and  continued  change  of  possession  of  the  things  mortgaged,  is 
absolutely  void  as  against  the  creditors  of  the  mortgagor,  and  as 
against  subsequent  purchasers  or  mortgagees  in  good  faith,  unless 


? 


164  SECURITY 

the  mortgage,  or  a  true  copy  thereof,  is  filed  as  directed  in  this 
article." 

The  city  clerk  of  the  city  of  Oneonta  placed  the  instrument  in 
question  on  file  and  indorsed  thereon  the  time  of  its  receipt,  and 
the  record  book  kept  in  the  office  of  said  clerk  shows  that  it  was  so 
filed  April  29,  1910,  4  P.  M.  Within  thirty  days  next  preceding 
the  expiration  of  one  year  from  the  time  of  filing  the  same  the 
plaintiff  filed  a  renewal  of  the  instrument,  describing  it  and  calUng 
it  a  chattel  mortgage,  and  asserting  in  such  renewal  that  there 
remained  unpaid  of  the  amount  secured  by  said  mortgage  the  sum 
of  $400  and  interest  thereon  from  a  day  specified. 

The  statutes  do  not  provide  for  filing  an  instrument  intended  as 
an  absolute  transfer  of  personal  property,  but  require  in  immediate 
delivery  of  the  property  followed  by  actual  and  continued  change 
of  possession  to  avoid  a  presumption  of  fraud.  (Personal  Prop- 
erty Law  [Cons.  Laws,  ch.  41],  §  36.)  The  intention  of  the  statute 
first  quoted  is  clear,  and  a  reference  to  some  of  the  decisions  of 
our  courts  will  show  that  a  conveyance  intended  to  operate  as  a 
mortgage  of  goods  and  chattels  has  at  all  times  been  treated  under 
that  statute  the  same  as  a  chattel  mortgage. 

The  right  to  redeem  is  the  essential  characteristic  of  a  mortgage, 
and  a  bill  of  sale  of  chattels  with  a  separate  defeasance  is  as  clearly 
a  mortgage  as  if  the  defeasance  formed  a  part  of  the  bill  of  sale. 
{Mooney  v.  Byrne,  163  N.  Y.  86,  92;  Brown  v.  Bement,  8  Johns.  96; 
Jones  on  Chattel  Mortgages,  §  19.)  An  agreement  to  sell  the  same 
property,  for  the  same  price,  made  at  the  same  time,  and  between 
the  same  parties,  is  a  defeasance.  {Dickinson  v.  Oliver,  195  N.  Y. 
238,  246.) 

A  bill  of  sale  absolute  on  its  face  transferring  property  to  be 
held  as  security  for  the  payment  of  a  debt  due  the  vendee  is  in 
character  and  effect  a  mortgage  and  is  to  be  treated  as  such. 
{Smith  V.  Beattie,  31  N.  Y.  542;  Woodworth  v.  Hodgson,  56  Hun, 
236;  Kings  County  Bank  v.  Courtney,  69  Hun,  152;  Susman  v. 
Whyard,  149  N.  Y.  127;  Dickinson  v.  Oliver,  96  App.  Div.  65; 
S.  C,  195  N.  Y.  238,  affirming  127  App.  Div.  932;  Sloan  v.  Na- 
tional Surety  Co.,  74  App.  Div.  417.)  And  this  is  true,  not  only  as 
between  the  parties  to  the  transaction,  but  also  as  to  third  parties 
who  are  affected  with  notice.  (5  Ruling  Case  Law,  388.)  It  may 
be  shown  by  parol.  {Despard  v.  Walhridge,  15  N,  Y.  374;  Horn  v. 
Keteltas,  46  N.  Y.  605;  Barry  v.  Colville,  129  N.  Y.  302.)  The  in- 
tention may  be  manifested  by  the  instrument  itself,  or  by  a  written 
instrument  of  defeasance  executed  simultaneously  with  the  con- 


SHELDON    V.    MCFEE  165 

veyance  or  by  the  parol  declaration  or  even  the  acts  of  the  parties. 

(Clark  V.  Henry,  2  Cow.  324.) 

/     Where  a  bill  of  sale  absolute  upon  its  face  is  in  fact  given  as  \ 

/  security  for  the  payment  of  a  debt  due  the  vendee  it  must  be  filed     \ 

\V  in  accordance  with  the  statute.     (Lien  Law,  §  230;  Woodworth  v.     / 

^iodgson,  supra;  Preston  v.  Southwick,  115  N.  Y.  139;  Kings  County  I 

Bank  v.  Courtney,  supra;  Sloan  v.  National  Surety  Co.,  supra.)         -^ 

In  the  Preston  case,  referring  to  certain  bills  of  sale  therein  de- 
scribed, the  court  say:  "If  they  be  considered  as  absolute  bills  of 
sale,  they  were  not  required  to  be  filed,  as  it  is  only  'mortgages  or 
conveyances  intended  to  operate  as  mortgages  of  goods,'  etc., 
that  are  referred  to  in  the  statute  requiring  filing  (§  1,  chap.  279, 
Laws  of  1833).  If  we  regard  them  as  convej-ances,  intended  to 
operate  as  mortgages,  then  they  were  properly  filed  in  accordance 
with  the  statute"  (p.  148). 

It  was  therein  claimed  by  the  appellant  that  the  evidence  shows 
that  the  transfers  were  intended  to  operate  as  mortgages  only  and 
that  because  this  intent  did  not  appear  in  the  instruments  filed  the 
filing  did  not  satisfy  the  requirements  of  the  statute.  It  appeared 
that  a  subsequent  paper  was  executed  which  it  was  claimed  by 
appellant  was  a  defeasance.  The  court  say:  "There  was  no  neces- 
sity for  or  propriety  in  the  filing  of  this  paper  with  the  bills  of  sale. 
The  instruments  required  to  be  filed  are:  First.  IVIortgages;  that 
is,  instruments  having  the  form  and  character  of  mortgages. 
Second.  Conveyances  intended  to  operate  as  mortgages.  It  is 
quite  immaterial  how  this  intention  is  expressed,  whether  in  writing 
or  by  parol.  However,  it  exists,  the  requirement  of  the  statute 
is  that  the  conveyance  shall  be  filed.  It  is  quite  obvious  that  the 
statute  did  not  intend  to  require  the  fihng  of  an  intention,  as  that 
would  be  physically  impossible  if  resting  in  parol  alone.  The 
existence  of  a  parol  agreement  between  parties  that  a  conveyance 
shall  be  regarded  as  a  security  for  a  debt,  undoubtedly  invests 
it  in  many  respects  with  the  characteristics  of  a  mortgage;  but, 
strictly  speaking,  it  does  not  make  it  a  mortgage.  It  must,  then, 
be  filed  as  a  conveyance  or  bill  of  sale,  and  the  extrinsic  agreement 
forms  no  part  of  the  instrument  required  to  be  filed  "  (p.  149). 

At  the  time  of  the  commencement  of  this  action  the  legal  title 
to  the  safe  was  vested  in  the  plaintiff,  and  he  could  maintain  the 
action.    (Bragelman  v.  Daue,  69  N.  Y.  69.) 

It  must  have  been  found  as  a  fact  by  the  jury  that  the  bill  of 
sale  in  question  was  intended  to  operate  as  a  mortgage  of  goods 
and  chattels,  and  that  it  was  properly  filed  in  the  city  clerk's/ 


166  SECURITY 

office.    By  the  terms  of  the  statute  such  filing  was  constructive 
notice  to  the  defendants  of  the  plaintiff's  claim. 
The  judgment  should  be  affirmed,  with  costs. 

WiLLARD     BaRTLETT,     Ch.     J.,     COLLIN,     CUDDEBACK,     HOGAN, 

Cardozo  and  Pound,  JJ.,  concur. 

Judgment  affirmed. 


CHAPTER  II.    (Continued) 
Section  II.— Absolute  Deed— Parol  Evidence 

COTTERELL  y.   PURCHASE 
Court  of  Chancery,  1734  . 

(Cas.  temp.  Talb.  61) 

The  plaintiff  and  her  sister  being  seijed_ofaiLestatein  YoiMuiS 

as  joint  tenantsTTRepTamtiff  by  leasTand  release,  in  consideration 

of  104/.  conveys  the  moiety  to  the  defendant  and  hi!rReiii.Lbut  jt_ 
~was  admitted,  that  tTie^cohveyancelthough  absolge^^ 
intended  by  the  parties  as  a  mortgage,  to  be  redeemable  on  pay-  — 
~  ment  of  the  money  with  interesjr  Some  time  atter7in  tlie  year 
r/U8,  fhosTgeeds  were  cancelled;  and  in  consideration  of  a  farth^ 
sum,  which  made  up  the  whole  184/.  she  conveys  the  estate  in 
manner  as  l)efore,  but  with  this  farther  covenant.  That  she  woul^ 
'  not  agree  to  any  division  or  partition  of  the  estate,  or  make,  or^ 
"cause  to  be  made,  any  division  or  partition  thereof,  without  tha, 

-license,  consent,  advice  and  appointment  of  him  the  said  Benjamin 

"  Purchase.    At  the  time  of  this  conveyance  the  plaintiffs  sjstei-jiias— 
IrT^os^ssion  oT  the  whole  estate,  and  so  continued  tilJjJi£_year 
"  1710,  when  the  defendant  turned  her  out  of  possession  of  the  moiety 
'  by  ejectment;  and  from  that  time  he  enjoyed  it  quietly  till  1726^at 
which  time  the  plaintiff  filed  her  bill  to  [be]  let  into  redeuiptioa; 
^0  which  the  defendant  pleaded  "himself  an  absolute  pm-chnser  Iqjl 
'"  a  valuable  consideration;  and  ifrT732,  the  cause  coming  to  be  heard 
^  upon  the  merits,  the  Master" of  the  Rolls  was  of  opinion,  that  the 
deeds  of  1708,  amounted  to  an  absolute  conveyaecei-and  dismissed     - 
the  bill.  I 

ForlHe  defendant  were  given  in  evidence  several  particulars  to  I 
shew  that  by  the  deeds  of  1708,  the  parties  intended  an  absolute! 
conveyance  of  this  estate.    And  it  was  insisted  that  as  the  deeds  | 
were  an  absolute  conveyance  in  law,  by  the  statute  of  frauds  no  I 
trust  or  mortgage  could  be  implied  without  an  agreement  in  writ-  I 
ing.    And  they  insisted  likewise,  that  as  the  defendant  had  been  1 

167  \ 


168  SECURITY 

in  possession  ever  since  the  year  1710,  the  plaintiff  was  barred  of 
the  redemption  by  the  statute  of  hmitations. 

It  was  said  on  the  other  hand  for  the  plaintiff,  That  the  de- 
fendant's plea  admitted  the  first  conveyance  made  in  consideration 
of  the  104Z.  to  be  intended  but  as  a  mortgage;  and  that  the  second 
conveyance  was  in  the  same  form,  excepting  the  covenant;  and  that 
it  was  therefore  probably  intended  in  the  same  manner.  That  as 
to  the  covenant,  it  made  strongly  for  the  plaintiff;  since  to  suppose  a 
person  would  absolutely  sell  away  his  estate,  and  then  covenant 
not  to  make  a  division  of  it,  is  absurd.  That  the  statute  of  frauds 
makes  nothing  against  the  plaintiff;  this  being  in  nature  of  a  re- 
sulting trust,  and  so  within  the  proviso  in  that  statute.  Nor  can 
the  statute  of  limitations  affect  the  plaintiff;  since  in  cases  of  re- 
demptions the  court  always  gives  what  it  thinks  a  reasonable 
time.  And  though  the  general  rule  be  not  to  exceed  twenty  years, 
unless  it  be  upon  extraordinary  circumstances;  yet  that  rule  can- 
not affect  the  plaintiff,  who  did  not  lose  possession  till  1710,  and 
brought  her  bill  in  1726. 

Lord  Chancellor  [Talbot].  The  case  is  something  dark. 
The  first  deed  is  admitted  to  be  a  mortgage;  and  the  second  is 
made  in  the  same  manner,  excepting  an  odd  sort  of  covenant,  which 
is  the  darkest  part  of  the  case:  for,  to  suppose  that  it  is  an  absolute 
conveyance,  and  to  take  a  covenant  from  one  who  had  nothing  to 
do  with  the  estate,  makes  both  the  parties  and  covenants  vain  and 
•ridiculous.  But  then  it  will  be  equally  vain  and  ridiculous  if  you 
suppose  the  deed  not  an  absolute  conveyance;  so  that  it  is  of  no 
great  weight,  and  must  be  laid  out  of  the  question.  Then  as  to  the- 
circumstances;  on  one  side  has  been  shewed  an  account  stated  of 
money  received;  and  it  is  there  said  so  much  received  on  account 
of  purchase  money,  and  in  another  general  account  the  sum  of 
184/.  is  called  purchase  money.  Then  as  to  the  agreement  in  1710, 
that  if  the  plaintiff  had  a  desire  for  it,  she  should  have  her  estate 
again  upon  payment  of  the  money  with  interest,  and  the  costs  he 
had  been  at:  this  shews  it  was  not  redeemable  at  first.  There  have 
been  strong  proofs  on  both  sides  as  to  the  value:  one  has  shewn  the 
rent  to  be  but  27L  per  ann.  and  then  deducting  one-third  out  of  it 
for  the  dower  of  the  plaintiff's  mother,  a  moiety  of  what  remains  is 
near  the  value  of  the  money  paid.  The  other  side  has  shewn  the 
rent  to  be  40L  per  ann.  But  I  rather  give  credit  to  the  first ;  because 
it  is  certain  the  dower  was  but  9/.  per  ann.  So  that,  upon  the  whole, 
I  am  inclined  to  think  this  was  at  first  an  absolute  conveyance.. 


>4 


KELLERAN   V.    BROWN  169 

Had  the  plaintiff  continued  in  possession  any  time  after  the  execu- 
tion of  the  deeds,  I  should  have  been  clear  that  it  was  a  mortgage; 
but  she  was  not.  And  her  long  acquiescence  under  the  defendant's 
possession  is,  to  me,  a  strong  evidence  that  it  was  to  be  an  absolute 
conveyance;  otherwise,  the  length  of  time  would  not  have  signified: 
for,  they  who  take  a  conveyance  of  an  estate  as  a  mortgage,  without 
any  defeazance,  are  guilty  of  a  fraud;  and  no  length  of  time  will 
bar  a  fraud.  Besides,  here  the  bill  was  filed  in  1726.  And  though 
the  cause  has  lain  dormant;  j^et  it  is  not  like  making  an  entry 
and  then  lying  still;  for,  in  the  present  case,  the  defendant  might 
have  dismissed  the  bill  for  want  of  prosecution,  or  they  themselves 
might  have  set  down  the  plea  to  be  argued. 

In  the  Northern  parts  it  is  the  custom  in  drawing  mortgages  to 
make  an  absolute  deed,  with  a  defeazance  separate  from  it;  but  I 
think  it  a  wrong  way;  and,  to  me,  it  will  always  appear  with  a  face 
of  fraud :  for,  the  defeazance  may  be  lost;  and  then  an  absolute  con- 
veyance is  set  up.  I  would  discourage  the  practice  as  much  as  pos- 
sible.^ 

Upon  the  circumstances  of  the  case,  affirmed  the  decree,  &c. 

KELLERAN  v.  BROWN 
Supreme  Judicial  Court  of  Massachusetts,  1808 
(4  Mass.  443) 

This  w^as  a  writ  of  entry,  and  upon  the  general  Jgsue^  pleaded 
was  tried  before  Thatcher,  J.,  yeptemHerTerm,  1806,  when  a  ver- 
dict  was  rendered  for  the  defendant. 

In  support  of  the  action,  the  demandant  read  in  evidence  a  deed 
of  Timothy  Manly  conveying  the  land  demanded  to  the  demand- 
ant in  fee. 

The  tenant,  in  defence  of  the  action,  having  prayed  in  aid  the 
title  of  Timothy  Manly,  under  whom  he  claims  the  premises  as 

^  "So  where  an  absolute  convey-  Mounlacute,    Finch,    Pre.    Ch.    526 

ance  is  made  for  such  a  sum  of  money,  (1719). 

and  the  person  to  whom  it  was  made,  "Suppose  a  person  who  advances 

instead  of  entering  and  receiving  the  monej^  should,  after  he  has  executed 

profits,    demands    interest    for    his  the  absolute  conveyance,   refuse  to 

money  and  has  it  paid  him,  this  will  execute  the  defeazance,  will  not  this 

be  admitted   to  explain  the  nature  court  relieve  against  such  fraud?" — 

of  the  conveyance." — Per  Lord  Ch.  Per  Lord  Ch.  Hardwicke,  in  Walker 

Nottingham,   in   Maxwell   v.   Lady  v.  Walker,  2  Atk.  98  (1740). 


^ 


\ 
\ 


170  SECURITY 

his  tenant,  the  counsel  for  the  tenant,  to  show  the  demandant 
ought  not  to  have  judgment,  except  as  in  an  action  upon  a  mort- 
gage, offered  to  read  in  evidence  an  agreement  in  writing  signed 
by  the  demandant,  and  bearing  even  date  with  the  deed  aforesaid, 
in  the  following  terms,  viz.:  "Thomaston,  May  26,  1800.  I, 
Edward  Kelleran,  the  subscriber,  having  purchased  of  Timoth}^ 
Manly  a  lot  of  land  lying  in  said  Thomaston,  containing  fifty 
acres  (being  the  lot  which  the  said  Manly  purchased  of  Ebenezer 
Bly)  for  which  I  have  received  a  warranty  deed;  but  if  the  said 
Manly  shall  repay  me  the  sum  of  four  hundred  dollars,  with  the 
lawful  interest  on  the  same  in  one  year  from  the  date  hel;^of,  I  then 
will  reconvey  the  said  lot  of  land  to  him.  Edward  Kell^n;"  and 
also  offered  to  prove  to  the  jury  that  the  tenant,  Brown,  at  the 
time  of  the  commencement  of  this  action,  and  for  a  long  time 
before,  was,  and  ever  since  has  been,  tenant  at  will  of  the  premises 
demanded,  under  the  said  Timothy  Manly,  the'aid^of  whose  title 
is  prayed  in  this  action.  "N 

The  demandant's  counsel  objecting,  the  judge  rejected  said 
agreement  and  evidence,  as  inadmissible.  To  which  opinion  of  the 
judge  the  counsel  for  the  tenant  excepted,  as  erroneous;  'where- 
upon the  cause  stood  continued  for  the  opinion  of  the  Court  upon 
the  said  exceptions. 

At  last  June  term  in  this  county,  the  cause  was  briefly  spoken 
to  by  M  ell  en  in  support  of  the  exceptions,  and  thence  continued 
for  advisement,  and  now  the  opinion  of  the  Court  was  delivered  by 

Parsons,  C.  J.  The  demandant  has  sued  a  writ  of  entry,  to 
recover  his  seisin  of  the  lands  demanded  in  his  writ  and  count. 
The  tenant  pleads  the  general  issue,  and  to  maintain  the  issue  on 
his  part,  offers  to  give  in  evidence  that  he  is  the  tenant  at  will  to 
one  Timothy  Manly;  and  that  Manly  conveyed  the  lands  de- 
manded to  Kelleran  in  mortgage.  To  prove  that  the  conveyance 
was  a  mortgage,  he  offered  to  read  in  evidence  a  contract  in  writ- 
ing, under  the  demandant's  hand,  of  the  following  tenor:  (Here 
his  honor  read  the  agreement  before  recited.)  But  the  judge 
rejected  the  evidence  that  he  was  tenant  at  will,  and  refused  to  let 
this  contract  be  read  to  the  jury. 

As  the  demandant,  in  his  writ,  had  demanded  a  freehold  of  the 
tenant,  he,  by  pleading  the  general  issue,  had  admitted  on  record 
that  he  was  the  tenant  of  the  freehold.  He  was,  therefore,  es- 
topped from  proving  that  he  had  not  the  freehold  but  was  a  teu- 
ant  at  will. 


KELLERAN    V.    BROWN  1"1 

As  to  the  effect  of  the  written  contract,  if  it  be  an  instrument  of 
defeasance  at  common  law  of  the  conveyance  made  by  Manly  to 
the  demandant,  the  tenant  might  have  read  it  in  evidence  to  show 
that  the  demandant  was  entitled  only  to  the  conditional  judgment, 
as  in  a  suit  to  foreclose  a  mortgage. 

In  chancery,  whenever  it  appears,  from  written  evidence,  that 
land  is  conveyed  as  a  pledge  to  secure  the  payment  of  money,  the 
conveyance  will  be  treated  as  a  mortgage,  in  whatever  form  the 
land  was  pledged,  and  if  we  had  all  the  equity  powers  of  a  Court 
of  Chancery,  I  should  be  satisfied  that  the  conveyance  in  this  case, 
with  the  written  contract  of  defeasance,  would  be  deemed  in  equity 
a  mortgage,  and  the  grantee  would  be  allowed  to  redeem. 

But  the  equity  powers  of  this  Court  are  derived  from  statute, 
and  are  extremely  limited.  We  can  relieve  mortgagors  only  in 
cases  where  the  lands  are  granted  on  condition,  by  force  of  any 
deed  of  mortgage,  or  bargain  and  sale  with  defeasance.  (Vide  Stat- 
utes 1785,  c.  22;  ^  1798,  c.  77.)  Now  a  defeasance  of  any  instru- 
ment of  conveyance  must  be  of  as  high  a  nature  as  the  convey- 
ance, must  be  executed  at  the  same  time,  and  is  to  be  considered 
as  part  of  it;  so  that  the  conveyance  and  defeasance  must  be  taken 
together  and  considered  as  parts  of  one  contract.  If,  therefore, 
the  conveyance  is  by  deed,  the  defeasance  must  be  by  deed.  In 
_thls-case  the  convevance  by  Manly  to  Kelleran  was  by  deed,  and 
the  agreement  by  Kelleran  was  merely_by  a  simple  contmcT;  and,  - 
TTowever  it  might  in  equity  have  theeffect  of  a  defeasance,  atTaw  it' 
^~rg-not  &  defeasance  6f  the  deed  of  Kelleran. 

The  counsel  tor  the  tenant  referred  to  the  statute  of  1802,  c.  33, 
which  provides  that  no  conveyance  of  any  land,  unless  for  a  term 
less  than  seven  years,  shall  be  defeated  or  incumbered  by  any  bond 
or  other  deed,  or  instrument  of  defeasance,  unless  they  are  regis- 
tered. This  provision  cannot  avail  to  enlarge  our  jurisdiction, 
which  was  not  within  the  purview  of  the  act.  What  shall  be 
deemed  an  instrument  of  defeasance  must  still  be  determined  upon 
the  principles  of  the  common  law.  The  written  contract  to  Kell- 
eran not  under  his  seal  was,  in  our  opinion,  properly  rejected  as 

evidence. 

Judgment  according  to  the  verdict. 

^  An  Act  giving  Remedies  in  Equity,      §1;  Gen.  Stats.,  c.  113,  §2,  and  see 
Perpetual   Laws   of    Mass.,    p.    138.      page  190,  post. 
Compare  Mass.  Stat.  1855,  c.  194, 


I 


172  SECURITY 

STRONG  V.  STEWART 

Court  of  Chancery  of  New  York,  1819 

(4  Johns.  Ch.  167) 

Rtt.t.  to  redeem  mortgaged  jpremises.  _The  defendant  set  up  an 
absolute  sale,  by  an  assignment,  absolute  in  terms,  of  the  right  of 
"^tcheirnTThe  land,  and  denied  the  fact  of  a  loan.  But  the  de- 
fendant, at  the  same  time,  admitted  in  his  answer,  that  after  the 
assignment  was  executed  he  gave  Mitchell,  at  his  request,  time  to 
return  the  money,  and  take  back  the  assignment. 

Parol  proof  was  taken,  which  established  conclusively  the  fact 
of  a  loan,  and  not  a  purchase  and  sale;  and  that  the  assignment 
was  made,  given  and  received,  by  way  of  security  for  a  loan. 

The  Chancellor  [Kent].  On  the  strength  of  the  authorities, 
and  on  the  proof  of  the  loan,  and  of  the  fraud,  on  the  part  of  the 
defendant,  in  attempting  to  convert  a  mortgage  into  an  absolute 
sale,  I  shall  decree  an  existing  right  in  the  plaintiffs  to  redeem. 
The  cases  of  Cotterell  v.  Purchase,  Cases  temp.  Talbot,  61;  Max- 
well V.  Mountacule,  Free,  in  Chancery,  526;  Washburn  v.  Merrills, 
1  Day's  Cases  in  Error,  139,  and  the  acknowledged  doctrine,  in  2 
Atk.  99,  258,  3  Atk.  389,  and  1  Powell  on  Mortg.  104  (4th  Lon- 
don edit.)  are  sufficient  to  show,  thatjarol  evidence  is  admissible 
jr.  gnpji  cases,  to  prove  that-aaagrtgage  was  intendedrand  not^an 
absolute  sale,  and  that  the  party  had  fraudulentlyper  verted  the 
Joanintita  ^alc-^  In  this  case,  the  a[*Ilissibns  in  fRTanswer  were 
sufficient  to  presume  a  mortgage,  against  the  absolute  terms  of  the 

assignment.^ 

Decree  accordingly. 

1  "Courts  of  equity  generally  exer-  would    be    perpetrated    under    such 

cise  such  power.    While  the  grounds  modes,    if    equity    could    not    grant 

upon  which  the  doctrine  is  admitted  reUef.     It  is   taking  an   agreement, 

vary  with  different  courts,  there  is  in  one  sense,  exceeding  and  differing 

a  great  concurrence  of  opinion  as  far  from   the  true  agreement.     Instead 

as  the  result  is  concerned.     In  our  of  setting  it  wholly  aside,  equity  is 

judgment,  it  is  a  sound  policy  as  well  worked  out  by   adapting  it  to   the 

as  principle  to  declare  that,  to  take  purpose  originally  intended.    Equity 

an  absolute  conveyance  as  a  mort-  allows    reparation    to    be   made   by 

gage  without  any  defeasance,  is  in  admitting  a  verbal  defeasance  to  be 

equity   a  fraud.     Experience  shows  proved."— Per  Peters,  J.,  in  Stinch- 

that  endless  frauds  and  oppressions  field  v.  Milliken,  71  Me.  567  (1880). 


TOWN  OF  READING  V.    WESTON  173 


TOWN   OF  READING   v.   WESTON 

] 
Supreme  Court  of  Errors  of  Connecticut,  1830 

(8  Conn.  117) 

This  was  an  action  of  assumpsit  for  the  support  of  the  wife  and 
minor  childrenot  tSamuel  Darhng. 

The  cause  was  tried  (after  two  former  trials)/  at  Fairfield,  De- 
cember term,  1829,  before  Williams,  J. 

The  paupers  derived  their  settlement  from  Lucy  Darling,  the 
mother  of  Samuel  Darling.  She  was  once  an  inhabitant  of  the 
town  of  Weston.  The  defendants  claimed,  that  in  March,  1808, 
she  became  the  owner  of  a  piece  of  land  in  the  town  of  Reading, 
of  the  value  of  800  dollars,  by  virtue  of  a  deed  from  one  Joseph 
Burr.  This  deed  was,  on  the  face  of  it,  an  absolute  deed,  in  the 
usual  form,  containing  the  usual  covenants.  A  writing  (recited  at 
length,  7  Conn.  Rep.  144)  was  made  and  signed  by  her,  and  deliv 
ered  to  Burr,  simultaneously  with  the  delivery  of  the  deed,  bind 
ing  herself,  if  Burr  should  within  three  years  bring  her  the  800 
dollars,  with  interest,  to  deliver  up  to  him  such  deed,  but  if  he 
should  fail  to  bring  the  money  by  the  time  limited,  he  should  for- 
feit all  claim  to  such  deed.  The  defendants  claimed  that  imme- 
diately after  the  execution  of  the  deed,  Lucy  Darling,  the  grantee, 
went  into  possession,  of  the  land  thereby  conveyed,  and  possessed 
it  in  her  own  right  in  fee  until  the  year  1813.  It  was  admitted 
that  she  occupied  part  of  the  house  and  garden,  belonging  to  the 
premises;  and  that  Burr  occupied  the  remaining  part,  during  the 
period  specified.  Evidence  was  introduced  as  to  the  character  of 
their  respective  possessions,  or  the  right  in  which  they  occupied  the 
premises;  the  plaintiffs  claiming  that  Lucy  Darling  occupied  as 
mortgagee  under  Burr  and  not  in  her  own  right.  Insupportof 
jj^is  claim  the  plajiiti££sJLLit£oduced  proof  of  her  declaration  that 
she  haH  61Tt5rainortgage  of  thepremises^  and  oilier  parol  evidence 
~to  shew  that  the  deed  an^  wntlhg  were  y;ivyil  Ullly  lo  secure  a  sum 
of  money,  which  Burr  at  that  time  borrowed  of  her,  and  for  which 
he  gave  her  his  notes.  Thjs  evidence  was  objected  to  by  the  de- 
fendants, but  was  received  subject  to  the  opinion  of  the  court .  Ant 
the  court  charged  the  jury  that  such  evidence  was  proper  to  shew 
the  nature,  character  and  extent  of  her  occupation;  but  that  in 

1  See  7  Conn.  Rep.  143,  409.— Kep. 


174  SECURITY 

I  this  suit  parol  evidence  could  not  be  admitted  to  alter,  enlarge  or 
I  explain  the  deed  or  condition,  or  to  shew  that  this  conveyance  was  a 
j  mortgage. 

'      The  jury  returned  a  verdict  for  the  defendants;  and  the  plain- 
tiffs moved  for  a  new  trial,  for  a  misdirection. 

HosMER,  Ch.  J.  The  only  question  in  the  case  is,  whether  the 
parol  evidence  offered  by  the  plaintiff,  to  control  or  vary  the  abso- 
lute deed,  was  admissible. 

On  a  former  occasion  between  the  present  parties,  it  was  decided 
by  this  Court  that  the  writing  in  question  was  onl}^  a  contract,  on 
certain  terms,  to  re-convey  the  land;  and  that  it  did  not  render  the 
deed  a  mortgage  (Reading  v.  Weston,  7  Conn.  Rep.  143).  ^^Injhe^ 
case  before  us,  the  parol  evidence  adduced  by  the  plaintiffa-tO— 
^rnvp  an  a|isniuie  dliiid  CU  bu  'd  dfud  Kjii  LUnditTon,  was  entirely  iji;:. 
"^admissible.  No  case  determined  in  a^om^~6f  law  provmglts  ad- 
missibility, has  been  cited;  nor  am  I  aware  that  any  such  case 
exists.  On  the  contrary,  in  Flint  v.  Sheldon,  13  Mass.  Rep.  443, 
it  was  adjudged  that  an  absolute  deed  of  land  cannot  be  varied 
by  parol  evidence  shewing  that  it  was  for  the  loan  and  re-payment 
of  a  sum  of  money.  This  determination  is  directly  in  point  for  the 
defendants.  It  has  been  so  frequently  adjudged  by  the  courts  on 
both  sides  of  the  Atlantic,  as  to  have  the  resistless  force  of  a  maxim, 
that  parol  evidence  cannot  be  received,  in  a  court  of  law,  to  con- 
tradict, vary,  or  materially  affect,  by  way  of  explanation,  a  written 
contract  (Skinner  &  ah  v.  Hendrick,  1  Root,  253;  Stack-pole  v. 
Arnold,  11  Mass.  Rep.  27;  Jackson  d.  Van  Vechten  &  al.  v.  Sill  &  al., 
11  Johns.  Rep.  201;  3  Stark.  Ev.  1002;  1  Phill.  Ev.  423,  441).  It 
is  not  in  opposition  to  this  legal  truth,  that  extrinsic  parol  evidence, 
when  requisite,  is  admissible  to  apply  the  terms  of  a  written  instru- 
ment to  a  particular  subject-matter,  but  in  perfect  consistency  with 
it.  This  is  not  to  vary  or  contradict,  but  to  give  its  intended  effect 
to  the  contract. 

Undoubtedly  there  have  been  determinations,  some  of  which 
have  been  cited,  proving  that  a  stranger  is  not  estopped  by  a 
written  agreement;  but  that  he  may  adduce  parol  testimony  to 
prevent  a  fraudulent  operation  of  it  upon  his  interests  (The  King  v. 
Scammonden,  3  Term.  Rep.  474;  New  Berlin  v.  Normch,  10  Johns. 
Rep.  229;  3  Stark.  Ev.  1018,  1052).  But  this  principle  has  no  ap- 
pHcation  to  the  present  case.  The  plaintiffs  have  not  suggested 
that  there  was  any  fraud  contemplated  and  practised  on  them. 
The  pretence  would  have  been  very  strange  unless  it  were  followed 


TOWN    OF   READING    V.    WESTON  175 

up  by  explicit  testimony  to  this  effect.  The  inhabitancy  of  Lucy 
Darling,  prima  facie,  with  property  sufficient  to  purchase  a  farm 
of  the  value  of  800  dollars,  was  a  benefit  to  the  plaintiffs,  and  not  a 
prejudice;  and  all  our  towns  would  be  pleased  in  this  manner  to 
extend  their  population. 

It  will  be  observed  that  the  question  before  us  is  not  what  a 
court  of  chancery  may  do,  in  the  exercise  of  its  peculiar  jurisdic- 
tion, but  what  is  the  established  rule  of  a  court  of  law.  _Tt  has  l^^^n 
^ften  decided  in  chancery  that  parol  evidence  is  admissible  to 
shew  that  an  aosoiute  deed  was  mtended  as  a  mortgage,  and  that  a 
defeasance  was  omitted  tiirougti  traud  or  mistake.  Hence,  a  deed 
absollitu  Uii  tile  lace  of  it,  and  though  registered  as  a  deed,  will  in 
chancery  be  held  vaUd  and  effectual  as  a  mortgage,  as  between  the 
parties,  if  it  was  intended  by  them  to  be  merely  a  security  for  a 
debt,  although  the  defeasance  was  by  an  agreement  resting  in 
parol  {Washburn  v.  Merrills,  1  Day,  139,  1  Pow.  Mort.  200;  Strong 
&  al.  V.  Stewart,  4  Johns.  Chan.  Rep.  167;  James  v.  Johnson  &  al., 
6  Johns.  Chan.  Rep.  417;  Maxwell  v.  Lady  Mountacute,  Free,  in 
Chan.  526;  Dixon  v.  Parker,  2  Ves.  225;  Marks  &  al  v.  Pell,  1 
Johns.  Chan.  Rep.  594;  Clark  v.  He7iry,  2  Co  wen,  324;  Slee  v.  Man- 
hattan Company,  1  Paige,  48).  But  these  decisions  are  altogether 
in  support  of  the  determination  of  the  judge  in  this  case.  Chan- 
cery interposes  because  a  court  of  law  does  not  afford  a  remedy. 
The  rule  in  the  coUrta.-Qf4ftw-TS-4bal_the  written  instrument,  in 


contemplation  of  lajS>>^efilainb-tkp  tnip  agreement  of  the  parties. 

"anTthat  the  writing  furnishes  better  evidence  of  thpjr  intention 

— tliau  awy  (.iIiaI  luit  be  supplied  by  paroj^  But  in  equity,  relief  may 

be  had  againsli.any  deed  or  contract  in  writing  founded  in  mistake 


"^r  iraud  (i  Madd.  Chan.  41;  Moses  v.  Murgatroyd,  1  Johns.  Chan. 
TTepn'28;  Marks  &  al.  v.  Pell,  1  Johns.  Chan.  Rep.  594;  Gillespie 
&  ux.  V.  Moon,  2  Johns.  Chan.  Rep.  585;  Nohle  v.  Comstock,  3 
Conn.  Rep.  295). 

On  the  whole,  it  is  incontrovertibly  clear  that  the  decision  com- 
plained of  is  correct,  and  that  a  new  trial  must  be  denied. 

Peters,  Williams  and  Bissell,  JJ.,  were  of  the  same  opinion. 

Daggett,  J.,  having  been  of  counsel  in  the  cause,  gave  no  opin- 
ion. 

New  trial  not  to  he  granted.^ 

^McClane  v.  White,  5  Minn.  178      (1861);  Gates  v.  Sutherland,  76  Mich. 

231  (1889),  accord. 


176 


SECURITY 


SWART  V.  SERVICE 

Supreme  Court  of  New  York,  1839 

(21  Wend.  36) 

This  was  an^ction  of  ejectment,  tried  at  the  Saratoga^circuilia 
May,  1837,  before  the  Hon.  John  Willard,  one  ot  the  circuitjudges. 

The  plaintiffs,  the_chikireiL,Qf  James  Swart,  deceased,  who  was 

the  only  child  and  heir  at  law  pf  Derick  Swart,  showed  title  by 

leQ^E^^OndTetms^r^eanng  date  24tFlin*-25th"September,  1784, 

^"^^ecuted  by  John_LJiI£ldon  to  Derick  Swart,  jioaveying  68  acres 


of  land,  the  premises  in  question:  which  jnstruments  of  lease  and 
release  were  duly  acknowledged  by  CuerdoiTon  the  sixth  day  of 
April,  18047  Cuerdon,  the  releasor  oi  the  premises,  died  in  pos- 
session of  the  premises  eight  or  nme  years  beTore  thje  trial,  having 
occupied  them  since  the  date  of  the  lease  and  reTeaseT^he  defend- 
ant was  in  possession  of  the  premises  at  the  comuTehcement  of  the 
suit.  He  offered  to  prove  that  the  leaM  and  release  was  in  fa^ 
given  as  a  mortgage  for  the  security  of  a  del)t  due  from  Cuerdon  to. 
Swart,  and  that  the  de])t  was  paid  by  Cuerdon  to  Swart  many  years 
before  his  death:  this  evidence  was  objected  to,  unless  the  defeiicl-_ 
ant  would  connect  himself  with  Cuerdon,  and  the  objection  was 
■  u  tgjnrd  by  th^  '^''£(^it  jud^  TFe'  defendant  then  requested 
the  judge  to  charge  that  the  evidence  established  an  adverse  pos- 
session in  Cuerdon.  The  judge  refused  so  to  charge,  and  directed  a 
verdict  for  the  plaintiffs,  and  the  jury  found  accordingly.  The 
defendant  now  moved  for  a  new  trial  on  the  two  grounds  raised 
at  the  circuit,  and  on  the  additional  ground,  that  from  lapse  of 
time,  payment  of  the  mortgage  might  be  presumed.  ... 


By  the  Court:  Co  wen,  J.  The  first  offer  made  by  the  defendant 
had  no  dependence  on  privity  of  title  between  him  and  Cuerdon. 
It  was  a  simple  offer  to  prove  an  outstanding  title,  by  turning  the 
conveyance  by  lease  and  release  into  a  mortgage,  and  shewing  its 
extinction  by  payment.  That  would  divest  the  title  of  Swart  and  of 
his  grandchildren,  the  plaintiffs;  for  payment  extinguishes  a  mort- 
gage at  law  as  well  as  in  equity  {Jackson,  ex  dem.  Rosevelt,  v.  Stack- 
house,  1  Cowen,  122).  But  independent  of  that,  if  Swart  were  a 
mere  mortgagee,  neither  he  nor  those  claiming  under  him  could 
recover  (2  R.  S.  237,  §  37,  2d  ed.,  Jackson,  ex  dem.  Titus,  v.  Myers, 


SWART    V.    SERVICE  177 

11  Wendell,  533,  538,  539;  Stewart  v.  Hutchins,  13  Wendell,  485; 
Morris  v.  Moivatt,  2  Paige,  586). 

It  has  often  been  held  in  the  courts  of  equity  of  this  State,Jliat  a 
deed,  though  absolute  on  its  face,  may,  by  parol  evidence;  be^hown 
to  "nave  been  in  lact  a  mortgage^^in  the  terms  offered  here ;  and  the 
same  doctrine  was  heldjg^this  court,  in  Rngch  v.  Cosine,  9  Wenrlell, 
227,  and  Waltoti  v.  Cronley's  AdmW,  14  id.  63,  equall v  applit-able  to 
a  court  of  Iaw,\and  has  it  seems  ceased  to  be  the  subject  of  contest; 
fui  nu  ubjg?5tt^a^to  the  doctrine  is  now  made.  For  one,  I  was  al- 
ways at  a  loss  to  see  on  what  principle  the  doctrine  could  be  rested, 
either  at  law  or  in  equity,  unless  fraud  or  mistake  were  shown  in 
obtaining  an  absolute  deed  where  it  should  have  been  a  mortgage.^ 
In  either  case,  the  deed  might  be  rectified  in  equity;  and  perhaps 
even  at  law,  in  this  State,  where  mortgages  stand  much  on  the 
same  footing  in  both  courts.  Short  of  that,  the  evidence  is  a  direct 
contradiction  of  the  deed;  and  I  am  not  aware  that  it  has  ever  been 
allowed  in  any  other  courts  of  equity  or  law.  But  with  us  the  doc- 
trine is  settled,  and  I  am  not  disposed  to  examine  its  foundations, 
at  least,  without  the  advantage  of  discussion. 

It  is  not  necessary  to  say  whether  the  lapse  of  time  might  be 
€alled  in  as  presumptive  proof  of  payment,  though  that,  as  a  gen- 
eral doctrine,  is  too  clear  to  be  disputed.  If  the  defendant,  on  a  new 
trial,  shall  succeed  in  making  out  a  mortgage,  he  will  be  entitled  to 
such  proofs  of  payment  as  the  nature  of  his  case  may  afford,  subject 
to  the  answering  proofs  of  the  plaintiffs,  provided  proof  of  payment 
shall  become  necessary. 

It  will  not,  however,  be  necessary  that  we  see,  to  complete  his 
defense  here,  whatever  it  may  be  on  a  bill  filed  to  foreclose  by  the 
representatives  of  Derick  Swart;  for  since  the  revised  statutes, 
showing  that  the  plaintiffs  or  those  under  whom  they  claim  are 
mere  mortgagees,  proves  as  we  have  seen,  an  outstanding  title. 

There  was  no  evidence  of  adverse  possession  in  Cuerdon.  I  am 
of  opinion  that  a  new  trial  should  be  granted;  the  costs  to  abide 
the  event. 

The  Chief  Justice  [Nelson]  concurred. - 

Mr.  Justice  Bronson  delivered  the  following  dissenting  opin- 
ion: 

Although  I  seldom  allow  myself  to  depart  from  the  decisions  of 

»This  language  was  approved  by      son,  13  Cal.  116  (1859),  refusing  so 
Burnett,  J.,  in  Lee  v.  Evans,  8  Cal.      to  limit  the  doctrine. 
424(1857).    But  see  Pierce  V.  i2of>m-  -Contra,    Wehh    v.    Rice,    (>    Hill 

(N.  Y.  Court  of  Errors),  219  (1843). 


178  SECURITY 

those  who  have  gone  before  me  in  this  nonrt,  I  cannot  a^ree  with 
my  ])rethren  in  followiniti  one  or  two  recent  cases  which  hold  that  an    -- 
^j_absolutU-(ieed  can  be  turned  into  a  mortgage  in  a  court  of  law;^by  _ 
parol  evidence.    Where  the  transaction  was  iiitended  as  a  mortgage, 
jrrvl  thrP"Ci^  trfllld  "^'  mistake  the  conveyance  has  been  made>bsQ>- 
lute- in  it-i  trrmi,  «  ^^iiyf  ot  equity,  actmg  upon  well-establislied    _ 
principles,  can  reform  the  deed.    But  this  will  only  be  done  on  a 
dTrect  and  appropriate  proceedings  for  that  purpose,  and  after 
such  ample  notice  to  all  parties  in  interest,  as  will  tend  most  ef- 
fectually to  guard  against  surprise,  fraud  and  false  swearing.    And 
besides,  a  court  of  equity  can  and  will  protect  third  persons  who 
may  have  parted  with  their  money  on  the  faith  of  the  deed.    But  a 
court  of  law  has  neither  power  nor  process  to  reform  a  deed.    If 
parol  evidence  to  contradict  or  insert  a  condition  in  the  conveyance 
can  be  received  at  all,  it  must  of  necessity  be  in  a  collateral  proceed- 
ing; and  it  must  be  received  whenever  either  party  chooses  to  offer 
it.     It  can  be  given  without  notice,  and  without  the  means  of 
guarding  against  the  obvious  danger  of  fraud,  surprise  and  per- 
jury.   And  beyond  this:  jyh.ea...a.jC-0urt  of  law  turns  an  absolute 
deed  into  a  mortgage,  it  has  no  power  to  protect  a  bona  fide  pur^ 
chaser.     Other  mischiefs  will  be  likely  to  result  from  admitting- 
such  avidence^butw'ithout  attempting  at  this  lime  to  point  them 
out,  I  shall  content  myself  with  dissenting  from  what  I  deem  a 
new.il,Qd  very  dangerous  doctrine. 


HODGES  V.  TENNESSEE  MARINE  AND  FIRE  IN- 
SURANCE CO. 

Court  of  Appeals  of  New  York,  1853 

(8  N.  Y.  416) 

This  was  an  action  brought  in  the  Superior  Court  of  the  city  of 


New  York  upon  a  pohcy  ot  insurance  upon  a  hotel  in  Massachu- 
_setts.  issued"byjthe  dejendani:  to  Joseph  A.  Slamm  on 'the  firsj  of 

September.  1848.    On  the  samc_day  Slamm  conveyed  the  premises 
^to  the  plaintiff  by  a  deed  absolute  on  its  face.    On  IHeJ^oflhe- 

same  month  iSlamm  with  the  assent  ot  the  company  assigned  the_ 

pohcy  to  the  plaintitt  "as  a  collateral  security^"    The  prop^ty  in^ 

sured  was  burned  in  the  month  ot  April,  IMl^' 

In  the  complaint  the  plaintiff  alleged  that  Slamm  had  conveyed 

the  insured  premises  to  him  by  deed,  "and  that  prior  to  and  at  the 


HODGES    V.    TENNESSEE   MARINE   AND    FIRE    INSURANCE    CO.       179 

time  of  the  conveyance  the  said  Slamm  had  been  and  was  legally  in- 
debted to  him,  and  as  a  further  security,  simultaneously  with  the 
conveyance"  assigned  the  policy  to  him  as  a  collateral  security. 
The  defendant  in  the  answer  denied  the  plaintiff's  right  to  recover, 
on  the  ground  that  the  assignment  was  approved  on  the  represen- 
"^atibn  thlCTTf  was  intended  as  a  collateraT  security  upon  an  indebt- 
edness  secured  by  a  mortgage,  when  in  fact  the  insured  premises^ 


lad  been  conveyed  absomtely  to  the  plaintiff,  by  means  whereof 

^he-po+rrrbecame  void.    The  plaintiff  replied,  denying  that  any 

Tepfesenfatioii  that  flTe'indebtedness  was  secured  by  a  mortgage 
was  made,  or  that  the  approval  of  the  defendant  was  made  on  the 
faith  of  such  a  representation,  and  averring  that  at  the  time  of  ap- 
proving the  assignment  the  defendant  was  informed  of  the  deed. 

On  the  trial  the  plaintiff,  after  giving  in  evidence  the  policy  and 
assignment  and  proving  the  loss,  rested.  The  defendant's  counsel 
then  moved  for  a  nonsuit,  which  was  denied.  The  deed  from 
Slamm  to  the  plaintiff  v;as  then  given  in  evidence,  and  it  was  proved 
by  witnesses  in  the  defendant's  office  that  at  the  time  the  approval 
of  the  assignment  was  made,  it  was  understood  to  be  collateral  and 

•  to  cover  some  mortgage,  and  that  the  blank  for  the  assignment 
was  there  filled  up  at  the  request  of  the  plaintiff.  The  defendant 
then  rested.  The  plaintiff  then  called  a  witness  to  show  that  the 
deed  was  given  merely  as  a  security  for  money  due  to  him  from 
Slamm.  The  defendant's  counsel  objected,  on  the  ground  that  the 
plaintiff's  pleadings  alleged  the  deed  to  be  an  absolute  conveyance, 
and  the  court  sustained  the  objection.  The  plaintiff's  counseUhen- 
moved  to  amend  the  complaint  by  adding  an  averment  that  the 

^conveyance  of  the  insured  premises  was  made  as  a  collateral  se^ 
cilrity  tor  an  indebtedness  of  iSlamm  to  the  plaintiff.    The  defend--, 

'^  ant  7rp|;)0ljed  the"  amendment,  on  the  ground  that  proof  of  such_ 

proposed  allegation  was  inadmissible,  as  it  went  to  contradict -op^ — - 
"^Tva^!^^^  debd^and.aiso  that  it  was  not  allowable  under  the  code  of_ 
procedure,  as  rt  went  to  make  out  a  new  case,  and  to  remedy  a 
failure  of  proof.    The  court  overruled  the  objections  and  allowed 
the  amendment  on  condition  that  it  be  deemed  traversed  by  the 


answer. 

The  plaintiff  then  proved  by  parol  that  the  deed  was  given  as  a 
collateral  security  for  money  owing  to  him  by  Slamm,  and  also  to 
cover  expected  advances.    The  parties  then  rested. 

The  defendant's  counsel  then  submitted  that  the  testimony 
showed  an  absolute  title  in  the  plaintiff  under  the  deed:  that  if  as 
between  the  immediate  parties  to  it  it  might  be  construed  as  a 


\ 


180  SECURITY 

mortgage,  yet  as  to  the  defendant  it  was  what  it  purported  to  be, 
an  absolute  deed.  The  court  overruled  the  objection  and  directed  a 
verdict  for  the  plaintiff.  The  judgment  rendered  upon  the  verdict 
was  affirmed  by  the  court  en  banc,  and  the  defendant  appealed. 

Johnson,  J.  The  determination  of  the  judge  in  allowing  the 
amendment  of  the  pleadings  was  within  his  discretionary  power, 
and  is  not  the  subject  of  review,  in  this  Court. 

The  remaining  question  in  the  cause  relates  to  the  existence  of 
an  insurable  interest  in  Slamm  at  the  time  of  the  assignment  of  the 
policy  to  Hodges  and  of  the  loss.  If  such  an  interest  existed,  then 
the  plaintiff's  recovery  cannot  be  disturbed. 

Upon  the  evidence  there  is  no  doubt  of  the  following  facts: 
That  at  the  time  when  the  insurance  was  effected,  September  1, 
1848,  Slamm  was  the  owner  in  fee  of  the  premises  insured;  that 
on  the  4th  of  September,  1848,  he  conveyed  the  premises  to  Hodges 
by  a  deed  absolute  upon  its  face,  but  intended  to  operate  as  a  mort- 
gage, and  that  upon  the  same  day  he  transferred  the  policy  to 
Hodges  as  collateral  security,  and  that  this  transfer  was  made  by 
the  assent  of  the  company. 

If  there  is  no  rule  of  law  forbidding  us  to  take  notice  of  the  fact 
that  the  deed  was  intended  as  a  mortgage,  then  beyond  all  question 
Slamm  as  the  owner  of  the  equity  of  redemption  in  the  premises 
had  an  interest  in  the  insurance  which  had  been  effected  by  him  as 
the  owner  of  the  fee,  and  the  assignment  with  the  company's  as- 
sent transferred  this  interest  to  Hodges  as  collateral  security,  and 
he  may  upon  the  ground  of  the  same  interest  sustain  the  recovery 
which  has  been  had  in  this  case. 

The  question  then,  taking  it  most  strongly  against  the  plaintiff, 
is,  whether  in  equity  Slamm  might  have  a  bill  to  redeem  against 
Hodges,  notwithstanding  the  deed  was  absolute  upon  its  face. 
Wehh  V.  Rice,  6  Hill,  219,  does  not  conflict  with  the  proposition  that 
such  a  bill  might  be  maintained.  It  only  professes  to  decide  that  at\ 
law  unwritten  evidence  is  inadmissible  to  show  that  a  deed  was  in- 
tended as  a  mortgage.  From  an  early  day  in  this  State  the  admis- 
sibility of  such  evidence  had  been  established  as  the  law  of  our 
Courts  of  Equity,  and  it  is  not  fitting  that  the  question  should  now 
be  re-examined.  Upon  the  authority  of  Strong  v.  Stewart,  4  J.  C. 
167;  Clark  v.  Henry,  2  Cow.  332;  Whittick  v.  Kane,  1  Paige,  2( 
Van  Buren  v.  Olmstead,  5  Paige,  10;  Mclntijre  v.  Humphreys,  1 
Hoff.  34,  with  which  agree  Taylor  v.  Little,  2  Sumner,  228;  Jen- 
kins  V.  Eldredge,  3  Story,  293,  in  all  which  cases,  except  Clark  v. 


DESPARD    V.    WALBRIDGE  181 

Henry,  the  point  was  directly  before  the  Court,  we  think  that  the 
plaintiff's  recovery  in  this  case  ought  to  be  sustained. 

RuGGLES,  Ch.  J.,  and  Gardiner,  Jewett  and  Mouse,  JJ.,  con- 
curred with  Judge  Johnson  in  favor  of  affirming  the  judgment. 

WiLLARD,^  Taggart  and  Mason,  JJ.,  were  for  its  reversal. 

Judgment  affirmed. 


DESPARD   V.    WALBRIDGE 
Court  of  Appeals  of  New  York,  1857 

(15  N.  Y.  374) 

This  action  was  brought  to  recover  for  the  use  and  occupation  of 
a  store,  in  Buffalo^y  the  defendant^  frorn^May  1st,  1851,  to  Au- 
gust 1st,  1851,  which  the  complaint  averred  to  be  worth  .$375.  It 
also  aveiredihaOEaHefendant  on  Mavlali^851.  agreed  to  pay  for 


such  use  and  occupation  $1500  per  annum^  payable  quarterly.  The 
action  was  tried  before  a  referee,  who  found  the  following  facts:  On 
the  8th  of  March,  1850,  one  Sherwood  demised  to  H.  B.  Ritchie  the 
store  above  mentioned,  and  another  adjoining,  for  two  years  from 
the  first  of  May  then  next,  with  alright  of  renewal  on  certain  con- 
ditions, Ritchie  convenanting  to  pay  a  certain  rent.  On  the  17th 
of  November,  1850,  Ritchie  assigned  this  lease  and  his  title  to  the 
term  thereby  granted  to  the  plaintiff.  At  the  time  of  such  assign- 
ment the  defendant  was  in  possession  of  the  premises  as  a  sub- 
tenant of  Ritchie,  under  a  lease  executed  April  30th,  1850,  for  the 
term  of  one  year  from  May  1st,  1850. 

Sherwood,  the  original  lessor,  on  the  9th  of  October,  1850,  as- 
signed his  interest  in  the  lease  executed  by  Ritchie  to  Robert  Codd 
for  the  purpose  of  securing  a  debt  which  he  owed  to  Codd.  On  the 
19th  of  November,  1850,  Ritchie  assigned  to  Codd  all  his  interest 
as  landlord  in  the  sub-lease  executed  between  himself  and  the  de- 
fendant. The  defendant  occupied  the  premises  under  the  lease 
from  Ritchie,  and  after  the  assignment  thereof  to  Codd  paid  the 
rent  to  the  latter.  On  the  1st  day  of  IVIay,  1851,  the  plaintiff  served 
on  the  defendant  a  written  notice  that  he  was  the  assignee  of 
Ritchie's  term,  and  that  in  case  the  defendant  held  over  beyond  his 
term,  then  at  the  point  of  expiring,  the  plaintiff  would  consider  the 
premises  as  held  and  taken  by  defendant  for  the  term  of  one 

iThe  dissenting  opinion  of  Wil-  Wehh  v.  Rice,  6  Hill  (N.  Y.).  219 
i,ARD,    J.,    is    omittetl.     It    followed       (18-43). 


182  SECURITY 

year  from  May  1st,  1851,  at  the  annual  rent  of  $1500,  payable 
quarterly. 

The  plaintiff,  having  proved  these  facts,  rested  his  case,  and  the 
defendant  moved  for  a  non-suit,  which  being  refused  by  the  referee, 
he  took  an  exception.  Other  exceptions  were  taken  upon  the  trial, 
and  to  the  referee's  report,  which,  with  the  facts  relating  thereto, 
sufficiently  appear  in  the  opinion  of  the  court.  The  referee  re- 
ported that  the  defendant  occupied  under  an  implied  agreement  to 
pay  what  the  occupation  of  the  premises  was  reasonably  worth, 
which  he  found  to  be  at  the  rate  of  $1200  per  annum.  Judgment 
was  entered  upon  his  report,  which  was  affirmed  by  the  Supreme 
Court  at  general  term,  and  the  defendant  appealed. 

Selden,  J.^  .  .  .  The  principal  question  is  that  which  arises 
upon  the  exception  stated  in  the  referee's  report.  It  is  set  forth  in 
the  answer,  in  substance,  that  the  assignment  of  the  Sherwood 
lease  from  Ritchie  to  the  plaintiff  was  made  at  the  request  and  for 
the  benefit  of  Codd,  and  for  the  sole  purpose  of  aiding  the  latter  in 
the  collection  of  his  debt  against  Sherwood.  It  is  also  stated  that, 
this  debt  had  been  fully  paid  before  May  1st,  1851,  by  Hiram  E. 
Howard,  who  had  succeeded  to  the  rights  of  Sherwood  in  the 
premises,  and  that  Ritchie,  on  Ijhe  1st  of  May,  1851,  surrendered 
all  his  rights  in  the  premises  to  Howard,  whose  tenant  the  defend- 
ant then  became.  These  facts  the  defendant  offered  to  prove  and 
his  offer  was  rejected.  .  .  . 

But  it  is  urged  that  the  proof  offered  was  properly  excluded  for 

another  reason.    The  assignment  to  the  plaintiff  being  absolute  in 

its  terms,  it  is  sp^(]  that  parol  evidence  was  i n admissible J^CLShow 
that  it  was  intended  as  security  merely;  and  the  case  of  Wehh  v. 
Rice,  6  Hill,  219,  is  cited  in  support  oT  this  position.    It-\s:asJ^eld 
in  that  case  that  in  an  action  at  law  parol  evidence-could  not  be. 
received  to  show  that,aL-deed,  absolute  upon  its  face,  was  intended 
as  a  mortgage.    It  was^onceded,  however,  that  the  rule  was_set- 
tled  otherwise  in  equity.  "In'the  case  of  Hodges  v.  The  Tennessee 
InsuMYite  Company,  4  Seld.  416,  this  court  held  that  the  rule  in 
equity  continued  the  same  since  the  case  of  Wehh  v.  Rice  as  before. 
The  only  question,  therefore,  upon  this  subject  is  whether  the '-'^ 
equity  rule  is  applicable  to  the  present  case,  which  is  a  purely     » 
legal  action.     As,  however,  since  the  enactment  of  the  Code  of 
procedure  a  defendant  may  avail  himself  ofaii  equitable  as  well__ 
as  a  legal  defense  in  all  cases,  whatever  may  be  the  naturejjf  the 
1  Portions  of  the  opinion  are  omittec 


DESPARD    V.    WALBRIDGE  183 

action,  there  would  seem  to  be  but  little  room  for  doubt  upon  the 
pbifTtXDobson  v.  Fierce,  2  Kern,  1'56;  Crary  v7't7od3man,  id.  266 ; 
Code,  §  150,  subd.  2).  That  a  deed  absolute  on  its  face  was  in- 
tended  as  a  mortgage,  would,  betore  the  Code,  have  been  an  equi- 
'^IH.ble  defense, 'Tjecause  it  could  not  have  been_£roYed-at  law/~Tn 


^  order  that  it  should  now  be  made'available  in  legal  actions,  as  pro- 
vided by  the  Code,  the  evidence  to^stablish  it  must  be^dmitted 
in  tiiat  class  of  actions. 

It  may  still  be  said  that,  admitting  it  to  be  shown  that  the  assign- 
ment to  the  plaintiff  was  merely  collateral  to  the  debt  of  Sherwood 
to  Codd,  and  that  this  debt  had  been  fully  paid  prior  to  May  1st, 
1851,  yet  so  long  as  the  lease  was  not  reassigned,  the  legal  title 
remained  in  the  plaintiff,  and  that  Ritchie  could  not  surrender  the 
lease  while  this  title  remained  outstanding.  The  answer  to  this  is, 
that  if  the  assignment  was  collateral,  it  is  the  same  as  if  the  con- 
dition had  been  incorporated  in  the  assignment  itself,  that  upon 
paj'ment  of  the  debt  the  rights  of  the  assignee  should  cease;  and  in 
such  a  case  it  is  clear  that  no  formal  reassignment  would  be  neces- 
sary. Whatever  might  be  the  effect  of  such  an  assignment  in  the 
hands  of  a  subsequent  bona  fide  assignee,  it  cannot  be  set  up  by  the 
original  assignee  as  evidence  of  a  subsisting  title  in  him,  after  full 
performance  of  the  conditions  upon  which  it  was  made. 

There  is  still  another  question  of  fact  which  arose  at  the  trial, 
but  which  was  not  passed  upon  by  the  referee,  viz.,  whether  the 
assignment  to  the  plaintiff  was  intended  as  a  security  not  only  for 
the  debt  of  Sherwood  to  Codd,  but  for  that  of  Ritchie  also.  Should 
it  turn  out  upon  the  new  trial  that  the  lease  was  assigned  as  security 
for  both  debts,  and  either  remained  unpaid  on  the  1st  of  May,  1851, 
then  the  case  on  the  part  of  the  plaintiff  would  be  made  out. 

The  judgment  must  be  reversed  and  a  new  trial  must  be  ordered, 
with  costs  to  abide  the  event. 

All  the  judges  who  had  heard  the  argument  concurring  in  this 
opinion, 


New  trial  ordered 


1  That  such  evidence  is  admissible  mortgage,    see    Wilson    v.    Parshall, 

at  law,  see  Jackson  v.  Lodge,  36  Cal.  129  X.  Y.  223  (1891),  where  Eahl,  J., 

28  (1868),  elaborately  reviewing  the  said  at  page  225:  "The  security  of 

authorities;  Mc Annuity  v.  Seick,  59  titles  and  sound  public  policy  require 

la.    586    (1882);    Calif.    Civ.    Code,  that  a  party,   alleging  that  a  deed 

1885,   §2925;  No.  Dak.  Civ.  Code,  absolute  in  form  is,  nevertheless,  a 

1895,  §  4703.  mortgage,    should   show    it    by   very 

As  to  the  weight  of  evidence  re-  satisfactory  evidence,  and  where  he 

quired  to  prove  an  absolute  deed  a  attempts  to  show  it  by  oral  evidence, 


184  SECURITY 

CAMPBELL   V.   DEARBORN 

Supreme  Judicial  Court  of  Massachusetts,  1872 

(109  Mass.  130) 

^  Bill  in  equity,^  filed  July  12,  1869,  t^a.com£eljLJ:eiamYexaii££^ 
land  Ijyihejjfilen'Jg^it  ^^  thp  plaintiff,  on  the  ground  that  the  plajn- 

^tiff's  conyeyance  of  itto_the  defendant,  although  iiijfomi^absolute, 
was  JQ  .substance  a  mortg;age. 

The  bill  alleged  that  the  plaintiff  on  June  11,  1866,  agreed  with 
Arteinas  Tirrill  for  th,£_piiidias£_b^im  from  said  Tin-in_of_aj)ar-^ 
eel  of  land  in  CharlestoWn,  andj.t  the  same  time  Tirrill  gaye  him 
a  bond  to  conyey  the  land  at  any  time  witliin  three  years  froni 
-saidJuneTlTuporr  the  payment~"to  him  of  .f^500,  the  plaintiff  to 
pqy  f^]]  q,|^ppsg7ppnts  upon  the  land  meanwhile;  that  since  taking  the^ 
bond  the  plaintiff  has  occupied  the  land;  that  in  the  early  part  of 
June,  1869,  he  made  arrangenxeiitj^Jo  1  xjrrcnv  t he  sum  of  85500^ 
from  /^harJIlljL  Wnl^^^',  "^  ^^df^  ^^  tpude^the  same  to  Tirrill,  and 
secure  performance.- of  his  o])ligation  to  conyey,  within  the  time 
fixed  in  the  bond;ihaXon  June  11,,  1S()9,  being  disappointedln 
finding  Walker,  he  met  the  defendant  that  the  defendant  expressed 
regret  that  the  plaintiff  shoukl  be  obliged  to  lose  fulfilment  of  tl\e 
bond  through  not  having  in  time  the  moneyj:equired,  and  volun- 
-tapily-ofEered-to-leed-t©  the  plaintiff  the  required  amount,  and  tEe 
plaintiff  accepted  the  offer  as  an  act  of  friendship,  as  he  supposed? 
that  the  defendant  and  the  plaintiff  went  immediately  .to  Tirrill 
and  t(>ndered  to  him  said  sum  of  $5500,  and  Tirrill  thereupon  de^ 
livered  to  the^plaiiitiff  his  deed  oTTlTeMid  in  fee  simple^  jn_comt 
pliance  with  the.  bond,  which  deed  was  dated  May  21,  and  was 

^^.acknowledged  before  the  .defendant  as  a  justice^  of  the  peace^orr 
said  June  11,  1869;  that  upon  leaving  Tirrill  the  defendant  said  to^ 
the  plaintiff  that  he  ought  to  be  secured  for  his  loan  in  some  way, 
and  proposed  that  they  should  go  to  the  defendant's  attorney ,^0 
have  the  necessary  papers  prepared;  that  they  thereupon  went  to 
the  attorney's  office,  where  the  defendant  and  the  attorney  con- 

—wjited  together  privately,  and,  without  consulting  jhe  plaintiff,  an 
^instrument  was  drawn,  and  handed  to  him  to  sign,  which  upon 

his   proof    should    amount   to   more      consistent   with   one   theory   of   the 
than   a  mere   guess  or  surmise,   or      deed  as  with  the  other." 
even    inferences   which    are   just   as  '  The  statement  of  facts  has  been 

curtailed. 


CAMPBELL    V.    DEARBORN  185 

reading  he  found  to  be  drawn  to  convey  the  land  in  fee  simple  to 


.the  defend ant;jiiat  the  pTamtiir~oBjecteTt  to  this  form  of  convey- 
ance, and  desired  to  have  a  mortgage  drawn  Instead,  but  was  as- 
sun^d  1)3'  both  the  attorney  and  the  defendant  that  the  instrument 
i:)repared  would  have  the  same  effect;  that,  being  ignorant  ofThe 
legal  effect  of  said  instrument  made  under  such  circumstances, 
and  relying  on  the  statements  of  the  attorney  and  the  defendant, 
he  on  said  June  11  executed  and  delivered  said  deed  to  the  defends, 
ant;  and  that  it  was  recorded  in  the  registry  of  deeds  at  the  sam£_ 
time  with  Tirrill's  deecL-..  .  . 

'l"he  defendant,  in  his  answer,  denied  that  he  ever  made  or  of- 
fered to  make  any  loan  to  the  plaintiff;  alleged  that,  on  the  con- 
trary, he  refused  a  request  of  the  plaintiff  for  a  loan;  and  further 
alleged  that  "the  defendant  agreed  to  pay  Tirrill  the  said  sum  of 
$5500  for  the  premises  described  in  the  bill,  provided  the  title  to 
said  premises  should  stand  in  the  defendant's  name,"  and  the 
plaintiff  agreed  that  immediately  on  payment  of  the  sum  to  Tirrill 
the  land  should  be  conveyed  in  fee  simple  to  the  defendant,  "and 
the  plaintiff  should  not  have  any  interest  or  title  thereto;"  that  / 
thereupon  the  defendant  paid  the  S5500  to  Tirrill,  and  Tirrill  exe- 
cuted and  delivered  to  the  plaintiff  a  deed  of  the  land.  .  .  . 

Wells,  J.  Regarding  the  money  paid  to  Tirrill  for  the  land  as 
the  money  of  the  plaintiff",  by  loan  from  the  defendant,  there  is 
still  no  resulting  trust  in  favor  of  the  plaintiff  arising  from  the 
whole  transaction.  A  deed  was  taken  to  the  plaintiff,  according  to 
his  equitable  interest;  and  he  thereupon  conveyed  to  the  defendant 
by  his  own  deed.  The  recitals  and  covenants  of  that  deed  preclude 
him  from  setting  up  any  trusts  by  implication,  against  its  express 
terms  {Blodgett  v.  Hildreth,  103  Mass.  484).  His  agreement  with 
the  defendant  for  a  reconveyance  cannot  be  enforced  as  a  con- 
tract for  an  interest  in  lands  (Gen.  Sts.,  c.  105,  §  1),  nor  will  it 
create  an  express  trust  (Gen.  Sts.,  c.  100,  §  19).  The  question 
then  is.  Can  the  deed  be  converted  i^i;n  P  ^"■^^•^rrflP;^  ^''  '"^npf^-^^'liP'-l 
and  set  aside,  or  its  operation  restricted,  upon  any  grouijd  pi-opoi-l 
cognizable  in  a  couri^^of.xhatt^^¥y>? 

This  question  was  somewhat  discussed,  though  not  decided,  in 
Newton  v.  Fay,  10  Allen,  505.  Some  suggestions  were  made  as  to 
the  bearing  of  the  statute  of  frauds  upon  it,  in  Glass  v.  Hulbert, 
102  Mass.  24.  For  the  reasons  there  suggested,  we  do  not  regard 
the  statute  of  frauds  .as  interposing  any  insuperable  obstacle  to 
the  granting  of  relief  in  such  a  case;  because  relief,  if  granted,  is 


186 


SECURITY 


attained  by  setting  aside  the  deed;  and  parol  evidence  is  availed  of 
to  establish  the  equitable  grounds  for  impeaching  that  instrument, 
and  not  for  the  purpose  of  setting  up  some  other  or  different  con- 
tract to  be  substituted  in  its  place.  If  proper  grounds  exist  and 
are  shown  for  defeating  the  deed,  the  equities  between  the  parties 
will  be  adjusted  according  to  the  nature  of  the  transaction  and  the 
facts  and  circumstances  of  the  case;  among  which  may  be  included 
the  real  agreement.  It  does  not  violate  the  statute  of  frauds,  to 
admit  parol  evidence  of  the  real  agreement,  as  an  element  in  the 
proof  of  fraud  or  other  vice  in  the  transaction,  which  is  relied  on  to 
defeat  the  written  instrument.^ 

.^iiat  will  justify  a  court  of  chancery  in  setting  aside  a  forjaal 
jdeedT^id^  giving^thegrantor  an  opportimitv  to  rp.deen[i  the  lamJ^ 
j3n  the  ground  that  it  was  conveyed  onlvfor  securityj  although  no 
iefeasance  was  t^en,^  a  uuesliOii  oTgreat  difficulty,  and  one  upon 
which  there  exists  a  considerable  diversity  of  adjudication,  as  well 
as  of  opinion.  In  Story  Eq.,  §  1018,  it  is  stated  in  general  terms 
to  be  'Ifraud,  accident  and  mistake."  In  4  Kent  Com.,  6th  ed., 
142,  143,  it  is  laid  down  that  "parol  evidence  is  admissible  in 
equity,  to  show  that  an  absolute  deed  was  intended  as  a  mortgage, 
and  that  the  defeasance  was  omitted  or  destroyed  by  fraud,  sur- 
prise or  mistake."  "It  is  determined,  on  the  statute  of  frauds, 
that,  if  a  mortgage  is  intended  by  an  absolute  conveyance  in  one 
deed  and  a  defeasance  making  it  redeemable  in  another,  the  first 
is  executed,  and  the  party  goes  away  with  the  defeasance,  that 
is  not  within  the  statute  of  frauds"  {Dixon  v.  Parker,  2  Ves. 
Sen.  219,  225).  Similar  declarations  are  to  be  found  in  Walker  v. 
Walker,  2  Atk.  98;  Joynes  v.  Statham,  3  Atk.  388,  and  Maxwell  v. 
Mountacute,  Pre.  Ch.  526;  and  adjudications  in  Washburn  v. 
Merrills,  1  Day,  139;  Daniels  v.  Alvord,  2  Root,  196,  and  Brainerd 
V.  Brainerd,  15  Conn.  475;  and  see  Story  Eq.,  §  768. 

This  indeed  is  only  one  form  of  application  of  the  general  rule 


^  In  Pierce  v.  Robinson,  13  Cal.  116 
(1859),  Field,  J.,  said:  "As  the 
equity  upon  which  the  courts  act 
arises  from  the  real  character  of  the 
transaction,  it  is  of  no  consequence 
in  what  manner  this  character  is  es- 
tabUshed,  whether  by  deed  or  other 
writing,  or  by  parol.  Whether  the 
instrument,  it  not  being  apparent 
on  its  face,  is  to  be  regarded  as  a 
mortgage,  depends  upon  the  circum- 


stances under  which  it  wa3  made, 
and  the  relations  subsisting  between 
the  parties.  Evidence  of  these  circum- 
stances and  relations  is  admitted,  not 
for  the  purpose  of  contradicting  or 
varying  the  deed,  but  to  establish  an 
equity  superior  to  its  terms.  It  is 
against  the  policy  of  the  law  to  allow 
irredeemable  mortgages,  just  as  it  is 
against  the  policy  of  the  law  to  allow 
the  creation  of  inalienable  estates." 


CAMPBELL    V.    DEARBORN  187 

of  equity,  that  one,  who  has  induced  another  to  act  upon  the  sup- 
position that  a  writing  had  been  or  would  be  given,  shall  not  take 
advantage  of  that  act,  and  escape  responsibility  himself,  by  plead- 
ing the  statute  of  frauds  on  account  of  the  absence  of  such  writing, 
which  has  been  caused  by  his  own  fault.  Besides  the  cases  cited  in 
Glass  V.  Hulhert,  102  Mass.  24,  see  Bartlett  v.  Pickersgill,  1  Eden, 
515;  s.  c.  1  Cox  Ch.  15;  Browne  on  St.  of  Frauds,  §  94.  But  this 
principle  will  not  help  the  plaintiff  here,  because  he  does  not  allege 
that  any  defeasance  was  intended  or  expected;  and  it  is  found  by 
the  report  that  the  deed  "was  executed  by  the  plaintiff  intelli- 
gently, and  not  by  accident  or  mistake,  and  that  no  fraud  was 
practised  to  procure  its  execution,  other  than  may  be  inferred" 
from  the  facts  stated. 

From  those  facts,  and  from  the  bill  and  answer,  we  think  these 
points  must  be  taken  to  be  established,  to  wit,  1st,  that  the  plaintiff 
had  purchased  the  parcel  of  land  in  controversy  and  held  a  con- 
tract from  Tirrill  for  its  conveyance  to  himself  upon  payment  of 
the  sum  of  $5500;  2d,  that  the  money  was  paid  to  Tirrill,  and 
the  land  conveyed  by  Tirrill  to  the  plaintiff,  in  fulfilment  of  that 
contract;  3d,  that  the  money  was  advanced  by  the  defendant  to 
the  plaintiff  as  a  loan,  and  the  deed  from  the  plaintiff  to  the  de- 
fendant was  given  by  way  of  security  therefor.  The  report  finds, 
"from  all  the  circumstances  surrounding  the  transaction,  and  from 
the  acts  and  declarations  of  the  parties  at  the  time,  that  the  plain- 
tiff believed  and  had  reason  to  believe"  this  to  be  the  case. 

The  defendant,  in  his  answer,  does  not  pretend  that  he  ever  made 
any  contract,  either  with  Tirrill  or  the  plaintiff,  by  which  a  price 
was  agreed  upon  to  be  paid  by  him  as  and  for  the  purchase  of  the 
premises  for  himself.  His  only  allegation  to  this  point  is,  at  most, 
indirect  and  equivocal.  He  denies  that  said  estate  was  purchased 
of  Tirrill  for  the  plaintiff's  benefit,  "neither  did  this  defendant 
agree  to  purchase  it  for  the  benefit  of  the  plaintiff,  but  for  the  use 
and  benefit  of  the  defendant."  This  is  followed  by  an  argumen- 
tative assertion  of  equitable  title  acquired  as  a  resulting  trust  from 
payment  of  the  purchase  money,  and  that  the  deed  from  the  plain- 
tiff was  given  "for  the  purpose  of  vesting  both  the  legal  and  equi- 
table title  in  the  defendant."  He  does  allege  that  he  "agreed  to 
pay  Tirrill  the  said  sum  of  $5500  for  the  premises  described  in  the 
bill,  provided  the  title  to  said  premises  should  stand  in  the  de- 
fendant's name."  He  alleges,  with  sufficient  fulness  and  minute- 
ness, that  he  refused  to  make  a  loan  of  the  money  to  the  plaintiff 
both  "before  and  at  the  time  of  said  payment  to  said  Tirrill,"  and 


188  SECURITY 

refused  "to  allow  the  plaintiff  to  have  any  interest  in  said  money, 
or  the  premises  purchased  therewith,"  and  that  it  was  agreed  that 
the  premises  should  be  conveyed  in  fee  simple  to  the  defendant, 
"and  the  plaintiff  should  not  have  any  interest  or  title  thereto." 
He  further  avers  "that,  before  the  plaintiff  signed  and  executed  his 
deed  to  this  defendant,  said  deed  was  read  in  the  presence  and  hear- 
ing of  the  plaintiff,  and  he  was  then  and  there  informed  that  the 
same  was  an  absolute  conveyance,  and  that  he  ceased  thereby  to 
have  any  interest  whatever  therein."  Taking  the  facts  to  be  liter- 
ally as  thus  alleged,  they  significantly  suggest  the  inference  that 
the  money  was  advanced  by  the  defendant  for  the  accommodation 
of  the  plaintiff'  in  his  purchase  of  the  land,  and  the  deed  given  to 
the  defendant  for  his  security  therefor;  but  that  it  was  agreed  be- 
tween them  that  the  plaintiff  should  retain  no  legal  right  of  re- 
demption. He  was  to  trust  himself  wholly  to  the  good  faith  and 
forbearance  of  the  defendant. 

It  is  alleged  in  the  bill,  and  not  denied  in  the  answer,  that  the 
land  has  been  all  the  time  in  the  occupation  of  the  plaintiff.  We 
think  it  is  also  to  be  inferred  that  the  land  is  of  considerably  greater 
value  than  the  sum  advanced  by  the  defendant. 

From  the  wholej'ase  we  are  satisfied  that  it  was  a_transaction 
between  borFowerTnd  lender,  and  not, a  real  purchase  of  the  land- 
by  the  defendant.     We^-e  brought^  then,  to~tlie  question^  Can 
equity  reHeve  m  such  a  case? 

The  decisions  m  the  courts  of  the  United  States,  and  tht  opin- 
ions declared  by  its  judges,  are  uniform  in  favor  of  the  existence 
of  the  power,  and  the  propriety  of  its  exercise  by  a  court  of  chan- 
cery {Hughes  v.  Edwards,  9  Wheat.  489;  Sprigg  v.  Bank  of  Mount 
Pleasant,  14  Pet.  201,  208;  Morris  v.  Nixon,  1  How.  118;  Russell 
V.  Southard,  12  How.  139;  Taylor  v.  Luther,  2  Sumner,  228;  Flagg 
V.  Mann,  id.  486;  Jenkins  v.  Eldredge,  3  Story,  181;  Benileij  v. 
Phelps,  2  Woodb.  &  Min.  426;  Wyman  v.  Babcock,  2  Curtis  C.  C. 
386,  398;  s.  c.  19  How.  289).  Although  not  bound  by  the  authority 
of  the  courts  of  the  United  States,  in  a  matter  of  this  sort,  still 
we  deem  it  to  be  important  that  uniformity  of  interpretation  and 
administration  of  both  law  and  equity  should  prevail  in  the  state 
and  federal  courts.  We  are  disposed  therefore  to  yield  much  defer- 
ence to  the  decisions  above  referred  to,  and  to  follow  them,  unless 
we  can  see  that  they  are  not  supported  by  sound  principles  of  juris- 
prudence, or  that  they  conflict  with  rules  of  law  already  settled  by 
the  decisions  of  our  own  courts. 

We  cannot  concur  in  the  doctrine  advanced  in  some  of  the  cases, 


CAMPBELL   V.    DEARBORN  189 

that  the  subsequent  attempt  to  retain  the  property,  and  refusal 
to  permit  it  to  be  redeemed,  constitute  a  fraud  and  breach  of  trust, 
which  affords  ground  of  jurisdiction  and  judicial  interference. 
There  can  be  no  fraud  or  legal  wrong  in  the  breach  of  a  trust  from 
which  the  statute  withholds  the  right  of  judicial  recognition.  Such 
conduct  may  sometimes  appear  to  relate  back,  and  give  character 
to  the  original  transaction,  by  showing,  in  that,  an  express  intent 
to  deceive  and  defraud.  But  ordinarily  it  will  not  be  connected 
with  the  original  transaction  otherwise  than  constructively,  or  as 
involved  in  it  as  its  legitimate  consequence  and  natural  fruit. 
In  this  aspect  only  can  we  regard  it  in  the  present  case. 

The  decisions  in  the  federal  courts^Q . to_the_full_extent^f  aff Qril=^ 
ing  relief,  even  in  the  absence  of  proof  of  express  deceit  or  fraudu- 
lent  purpose  at  the  time  of  taking  the  deed,  and  although  the 
instrument  of  defeasance  "be  omitted  by  design  upon  mutual  con- 
fidence between  the  parties."    In  Russell  v.  Southard,  12  How.  139, 
148,  it  is  declared  to  be  the  doctrine  of  the  court,  "  that^vhenjt_ 
is  alleged  and  proved  that  a  loan  on  security  was  reallv  intended, 
and  the  defendant  sets  up  the  loan  as  pa3niient  ofjnrchase  money^ 
ancl  llitj  L'unveyance  as  a  sale,  botn  fraud  and  avice  in  the_consid::_ 
erartmi  are  3uffiGicrrtiTjyerred  and  proved  to  require  a  court  of^ 
"equity  to  hold  the  transaction  to  be  a  mortga,ge."    The  conclusion 
of  thTcourt  was,  "TEat  the  transaction  was  in  substance  a  loan  of 
money  upon  security  of  the  farm,  and,  being  so,  a  court  of  equity 
is  bound  to  look  through  the  forms  in  which  the  contrivance  of  the 
lender  has  enveloped  it,  and  declare  the  conveyance  of  the  land  to 
be  a  mortgage." 

This  doctrine  is  analogous,  if  not  identical  with  that  which  has 
so  frequently  been  acted  upon  as  to  have  become  a  general  if  not 
universal  rule,  in  regard  to  conveyances  of  land  where  provision  for 
reconveyance  is  made  in  the  same  or  some  contemporaneous  in- 
strument. In  such  cases,  however  carefully  and  explicitly  the  writ- 
ings are  made  to  set  forth  a  sale  with  an  agreement  for  repurchase, 
and  to  cut  off  and  renounce  all  right  of  redemption  or  reconveyance 
otherwise,  most  courts  have  allowed  parol  evidence  of  the  real  na- 
ture of  the  transaction  to  be  given,  and,  upon  proof  that  the  trans- 
action was  really  and  essentially  upon  the  footing  of  a  loan  of 
money,  or  an  advance  for  the  accommodation  of  the  grantor,  have 
construed  the  instruments  as  constituting  a  mortgage;  holding  that 
any  clause  or  stipulation  therein,  which  purports  to  deprive  the  bor- 
rower of  his  equitable  rights  of  redemption,  is  oppression,  against 
the  policy  of  the  law,  and  to  be  set  aside  by  the  courts  as  void  (4 


190  SECURITY 

Kent  Com.,  6th  ed.,  159;  Cruise  Dig.,  Greenl.  ed.,  tit.  xv,  c.  1,  §  21; 
2  Washb.  Real  Prop.,  3d  ed.,  42;  Williams  on  Real  Prop.,  353; 
Story  Eq.,  §  1019;  Adams  Eq.  112;  3  Lead  Cas.  in  Eq.,  3d  Am. 
ed.;  White  &  Tudor's  notes  to  Thornborough  v.  Baker,  pp.  605 
[*874]  &  seq.;  Hare  &  Wallace's  notes  to  s.  c.  pp.  624  [*894]  & 
seq.). 

The  rule  has  been  frequently  recognized  in  Massachusetts,  where, 
until  1855,  the  courts  have  held  their  jurisdiction  of  foreclosure 
and  redemption  of  mortgages  to  be  limited  to  cases  of  a  defeasance 
contained  in  the  deed  or  some  other  instrument  under  seal  (Erskine 
V.  Townsend,  2  Mass.  493 ;  Kelleran  v.  Brown,  4  Mass.  443 ;  Taylor 
V.  Weld,  5  Mass.  109;  Carey  v.  Rawson,  8  Mass.  159;  Parks  v. 
Hall,  2  Pick.  206,  211;  Rice  v.  Rice,  4  Pick.  349;  Flagg  v.  Mann, 
14  Pick.  467,  478;  Eaton  v.  Green,  22  Pick.  526).  The  case  of 
Flagg  v.  Mann  is  explicit,  not  only  upon  the  authority  of  the  court 
thus  to  deal  with  the  written  instruments  of  the  parties,  but  also 
upon  the  point  of  the  competency  of  parol  testimony  to  establish 
the  facts  by  which  to  control  their  operation;  although,  upon  con- 
sideration of  the  parol  testimony  in  that  case,  the  court  came  to  the 
conclusion  that  there  was  a  sale  in  fact,  and  not  a  mere  security 
for  a  loan. 

By  the  St.  of  1855,  c.  194,  §  1,  jurisdiction  was  given  to  this  court 
in  equity  "in  all  cases  of  fraud,  and  of  conveyances  or  transfers  of 
real  estate  in  the  nature  of  m.ortgages"  (Gen.  Sts.  c.  113,  §2). 
The  authority  of  the  courts,  under  this  clause,  is  ample.  It  is 
limited  only  by  those  considerations  which  guide  courts  of  full 
chancery  powers  in  the  exercise  of  all  those  powers. 

If  then  the  advantage  taken  of  the  borrower  by  the  lender,  in  re- 
quiring of  him  an  agreement  that  he  will  forego  all  right  of  redemp- 
tion in  case  of  non-payment  at  the  stipulated  time,  or  an  absolute 
deed  with  a  bond  or  certificate  back,  which  falsely  recites  the  char- 
acter of  the  transaction,  representing  it  to  be  a  sale  of  the  land  with 
a  privilege  of  repurchase,  be  a  sufficient  ground  for  interference 
in  equity  by  restricting  the  operation  of  the  deed,  and  converting 
the  writings  into  a  mortgage,  contrary  to  the  expressed  agreement, 
it  is  difficult  to  see  why  the  court  may  not  and  ought  not  to  inter- 
pose to  defeat  the  same  wrong,  when  it  attempts  to  reach  its  ob- 
ject by  the  simpler  process  of  an  absolute  deed  alone.  In  each  case 
the  relief  is  contrary  to  the  terms  of  the  written  agreement.  In 
one  case  it  is  against  the  express  words  of  the  instrument  or  clause 
relied  on  as  a  defeasance,  on  the  ground  that  those  words  are  falsely 
written  as  a  cover  for  the  wrong  practised,  or  an  evasion  of  the 


CAMPBELL    V.    DEARBORN  191 

right  of  redemption.  In  the  other  it  is  without  an  instrument  or 
clause  of  defeasance,  on  the  ground  that  it  was  oppressive  and 
wrongful  to  withhold  or  omit  the  formal  defeasance.  In  strict- 
ness, there  is  no  defeasance  in  either  case.  The  wrong  on  the  part 
of  the  lender  or  grantor,  which  gives  the  court  its  power  over  his 
deed,  is  the  same  in  both.  "For  they  who  take  a  conveyance  as  a 
mortgage  without  any  defeasance  are  guilty  of  a  fraud"  (Cotterell 
V.  Purchase,  Cas.  temp.  Talbot,  61).  See  also  Barnhart  v.  Green- 
shields,  9  Moore  P.  C.  18;  Baker  v.  Wind,  1  Ves.  Sen.  160;  Mellor 
v.  Lees,  2  Atk.  494;  Williams  v.  Owen,  5  Myl.  &  Cr.  303;  Lincoln 
V.  Wright,  4  De  Gex  &  Jones,  16. 

As  a  Questinn  qf  pviV}pnpp,_flTP^  prinGipktJs  f.hp  Sf^,n?^     In  either 
case  the  parol  evidence  is  admitted,  not  to  vary,  add  to  or  contr 
diet  the  writings,  but  to  estabhsh  the  fact  of  an  inherent  fault 
jthe  transaction  or  its  consideration,  which  affords  ground  f(jr  avoidj 

_lng  the  effect  of  the  writings,  by  restricting  theii"  opei'ation^  or  de^; 

feating  them  altogether. _  This  is  a  general  principle  of  evidence- 
well  establisned  and  recognized  both  at  law  and  in  equity  {Stack- 
pole  V.  Arnold,  11  Mass.  27;  Fletcher  v.  Willard,  14  Pick.  464;  1 
Greenl.  Ev.,  §  284;  Perry  on  Trusts,  §  226). 

The  reasons  for  extending  the  doctrine,  in  equity,  to  absolute 
deeds,  where  there  is  no  provision  for  reconveyance,  are  ably  pre- 
sented by  Hare  &  Wallace  in  their  notes  to  Woollam  v.  Hearn,  2 
Lead  Cas.  in  Eq.,  3d  Am.  ed.,  676,  and  to  Thornhorough  v.  Baker, 
3  id.  624.  See  also  Adams  Eq.,  Ill;  1  Sugd.  Vend.,  8th  Am. 
ed.,  Perkins  notes,  pp.  267,  268,  302,  303.  The  doctrine  thus  ex- 
tended is  declared,  in  numerous  decisions,  to  prevail  in  New  York; 
also  in  Vermont  and  several  other  States.  Mr.  Washburn,  in  his 
chapter  on  Mortgages,  §  1,  has  exhibited  the  law  as  held  in  the 
different  States,  in  this  particular;  and  the  numerous  references 
there  made,  as  well  as  by  the  annotators  in  the  other  treaties  which 
we  have  cited,  render  it  superfluous  to  repeat  them  here  (2  Washb. 
Real  Prop.,  3d  ed.,  35  &  seq.).  Upon  the  whole,  we  are  convinced 
that  the  doctrine  may  be  adopted  without  violation  of  the  statute  of 
frauds,  or  of  any  principle  of  law  or  evidence;  and,  if  properly 
guarded  in  administration,  may  prove  a  sound  and  salutary  prin- 
ciple of  equity  jurisprudence.  It  is  a  power  to  be  exercised  with  the 
utmost  caution,  and  only  when  the  grounds  of  interference  are 
fully  made  out,  so  as  to  be  clear  from  doubt. 

It  is  not  enough  that  the  relation  of  borrower  and  lender,  or 
debtor  and  creditor,  existed  at  the  time  the  transaction  was  entered 
upon.    Negotiations,  begun  with  a  view  to  a  loan  or  security  for 


192  SECURITY 

a  debt,  may  fairly  terminate  in  a  sale  of  the  property  originally 
proposed  for  security.  And  if,  without  fraud,  oppression,  or  unfair 
advantage  taken,  a  sale  is  the  real  result,  and  not  a  form  adopted 
as  a  cover  or  pretext,  it  should  be  sustained  by  the  court.  It  is  to 
the  determination  of  this  question  that  the  parol  evidence  is  mainly 
directed. 

The  chief  inquiry  is,  in  most  cases,  whether  a  debt  was  created 
by  the  transaction,  or  an  existing  debt,  which  formed  or  entered 
into  the  consideration,  continued  and  kept  alive  afterwards.  "If 
the  purchaser,  instead  of  taking  the  risk  of  the  subject  of  the  con- 
tract on  himself,  take  a  security  for  repayment  of  the  principal, 
that  will  vitiate  the  transaction,  and  render  it  a  mortgage  security" 
(1  Sugd.  Vend.,  8th  Am.  ed.,  302,  in  support  of  which  the  citations 
by  Mr.  Perkins  are  numerous).  But  any  recognition  of  the  debt 
as  still  subsisting,  if  clearly  established,  is  equally  efficacious;  as  the 
receipt  or  demand  of  interest  or  part  payment  {Eaton  v.  Green, 
22  Pick.  526,  530). 

Although  proof  of  the  existence  and  continuance  of  the  debt,  for 
which  the  conveyance  was  made,  if  not  decisive  of  the  character  of 
the  transaction  as  a  mortgage,  is  most  influential  to  that  effect ;  yet 
the  absence  of  such  proof  is  far  from  being  conclusive  to  the  con- 
trary (Rice  V.  Rice,  4  Pick.  349;  Flagg  v.  Mann,  14  Pick.  467, 
478;  Russell  v.  Southard,  12  How.  139;  Brown  v.  Deweij,  1  Sandf. 
Ch.  56).  When  it  is  considered  that  the  inquiry  itself  is  supposed 
to  be  made  necessary  by  the  adoption  of  forms  and  outward  appear- 
ance differing  from  the  reality,  it  is  hardly  reasonable  that  the  ab- 
sence of  an  actual  debt,  manifested  by  a  written  acknowledgment 
or  an  express  promise  to  pay,  should  be  regarded  as  of  more  signifi- 
cance than  the  absence  of  a  formal  defeasance.  It  of  course  com- 
pels the  party  attempting  to  impeach  the  deed  to  make  out  his 
proofs  by  other  and  less  decisive  means.  But  as  an  affirmative 
proposition  it  cannot  have  much  force. 

A  mortgage  may  exist  without  any  debt  or  other  personal  liabil- 
ity of  the  mortgagor.  If  there  is  a  large  margin  between  the  debt 
or  sum  advanced  and  the  value  of  the  land  conveyed,  that  of  it- 
self is  an  assurance  of  payment  stronger  than  any  promise  or  bond 
of  a  necessitous  borrower  or  debtor.  Hence  inadequacy  of  prjcfi^jft- 
such  case,  becomes  an  important  element  in  establishing  the  ohar- 
acitHl'  of  the  transaction.  Inadequacy  of  price,  though  not  of  itself 
alone  sufficient  ground  to  set  in  motion  chancery  powers  of  the 
court,  may  nevertheless  properly  be  effective  to  quicken  their 
exercise,  where  other  sufficient  ground  exists  (Story  Eq.,  §§  239, 


CAMPBELL   V.    DEARBORN  193 

245,  246);  and  in  connection  with  other  evidence  may  afford  strong 
ground  of  inference  that  the  transaction  purporting  to  be  a  sale 
was  not  fairly  and  in  reality  so  (Kerr  on  Fraud  and  Mistake,  186 
and  note;  Wharf  v.  Howell,  5  Binn.  499). 

Another  circumstance,  that  may  and  ought  to  have  much  weight, 
is  the  contmuance  of  the  grantor  iniire  use  and  occupation  of  the 
land  as  owner,  atter  ihn  apparent  sale  and^onveyance  {Cotterell  v. 
Purchase,  Uas.  temp.  Talbot,  61;  Lincoln  v.  Wright,  4  De  Gex 
<fc  Jones,  16).  These  several  considerations  have  more  or  less 
weight,  according  to  the  circumstances  of  each  case  {Conway  v. 
Alexander,  7  Cranch,  218;  Bentley  v.  Phelps,  2  Woodb.  &  Min. 
426).  It  is  not  necessary  that  all  should  concur  to  the  same  result 
in  any  case.  Each  case  must  be  determined  upon  its  own  special 
facts;  but  those  should  be  of  clear  and  decisive  import. 

In  the  present  case,  we  are  able  to  arrive  at  the  clear  and  satis- 
factory conclusion  that  there  was  no  real  purchase  of  the  land  by 
the  defendant,  either  from  Tirrill  or  from  the  plaintiff;  that  his 
advance  of  the  purchase  money  at  the  request  of  the  plaintiff' 
created  a  debt  upon  an  implied  assumpsit,  if  there  was  no  express 
promise;  and  that  it  was  the  expectation  of  both  parties  that  the 
money  would  be  repaid  soon  and  the  land  reconveyed.  Whatever 
may  have  been  the  intention  of  the  defendant,  he  must  have  known 
that  this  was  the  expectation  of  the  plaintiff;  and  it  is  most  favor- 
able to  him  to  suppose  that  it  was  his  own  expectation  also.  These 
conclusions  are  not  in  the  least  modified  in  his  favor  by  an  exami- 
nation of  his  answer. 

We  must  declare  therefore  that  in  equity  he  holds  the  title  sub- 
ject to  redemption  by  the  plaintiff  in  such  manner  and  upon  such 
terms  as  shall  be  determined  upon  a  hearing  therefor  before  a 
single  justice. 

Decree  accordingly} 

^  See  also,  Horn  v.  Keteltas,  46  few  States  (Norris  v.  McLam,  104 
N.  Y.  605  (1871);  Oberdorfer  v.  N.  C.  159  [1889];  Ga.  Code,  1895, 
White,  25  Ky.  L.  Rep.  1629,  78  S.  W.  §  2725;  Miss.  Ann.  Code,  §  4233),  and 
436  (1904);  Cullen  v.  Carey,  146  Mass.  its  influence  may  be  traced  in  many 
50  (1888);  Reich  v.  Cochran,  213  others  {Stutphen  v.  Cushman,  35 
N.  Y.  416  (1914).  III.  186  [1864];  StinchfieM  v.  Milliken, 

The  view  that  fraud,  mistake  or      71  Me.  567  [1880];  Russell  v.  South- 
undue  influence  must  be  shown,  once      ard,  12  How.  139,  147-8  [1851]). 
general,  has  been  for  the  most  part  "It  will  be  perceived  that  in  none 

abandoned.  See,  for  example.  Brain-  of  these  cases  did  the  court  attempt 
erd  V.  Brainerd,  15  Conn.  575  (1843)  to  range  the  jurisdiction  to  turn  an 
and  French  v.  Burns,  35  Conn.  359  absolute  deed  into  a  mortgage,  by 
(1868).     It  survives,  however,  in  a      parol   evidence,   under   any   specific 


194 


SECURITY 


N.  H.  Gen.  Laws,  c.  136.  §  1.  Every  conveyance  of  lands, 
made  for  the  purpose  of  securing  the  payment  of  money,  or  the  per- 
formance of  any  other  thing  in  the  condition  thereof  stated,  is  a 
mortgage  within  the  meaning  of  this  chapter. 

§  2.  No  conveyance  in  writing  of  any  lands  shall  be  defeated,  nor 
any  estate  encumbered  by  any  agreement,  unless  it  is  inserted  in 
the  condition  of  the  conveyance  and  made  part  thereof,  stating  the 
sum  of  money  to  be  secured  or  other  thing  to  be  performed.  (N.  H. 
Public  Statutes,  1901,  Ch.  139,  sees.  1-2.) 


Penn.  Laws,  1881,  No.  91.  §  1.  Be  it  enacted,  &c..  That  no  de- 
feasance to  any  deed  for  real  estate,  regular  and  absolute  upon  its 
face,  made  after  the  passage  of  this  act,  shall  have  the  effect  of  re- 
ducing it  to  a  mortgage,  unless  the  said  defeasance  is  made  at 
the  time  the  deed  is  made  and  is  in  writing,  signed,  sealed,  acknowl- 
edged and  delivered  by  the  grantee  in  the  deed  to  the  grantor,  and 
is  recorded  in  the  office  for  the  recording  of  deeds  and  mortgages 
in  the  county  wherein  the  said  lands  are  situated,  within  sixty 
days  from  the  execution  thereof;  and  such  defeasances  shall  be 
recorded  and  indexed  by  the  recorder.— Approved  the  8th  day  of 
June,  A.  D.  1881. 


head  of  equity,  such  as  fraud,  acci- 
dent or  mistake;  but  the  rule  seems 
to  have  grown  into  recognition  as 
an  independent  head  of  equity. 
Still  it  must  have  its  foundation  in 
this,  that  where  the  transaction  is 
shown  to  have  been  meant  as  a 
security  for  a  loan,  the  deed  will  have 
the  character  of  a  mortgage,  without 
other  proof  of  fraud  than  is  implied 
in  showing  that  a  conveyance,  taken 
for  the  mutual  benefit  of  both  parties, 
has  been  appropriated  solely  to  the 
use  of  the  grantee.  For  when  we 
seek  in  the  standard  authorities  for 
the  ground  or  principle  upon  which 
the  doctrine  of  the  admissibility  of 
parol  evidence  originally  rested,  it 
will  be  found  in  the  old  and  familiar 
heads  of  equity,  such  as  fraud,  acci- 
dent, mistake  or  trust.  Chancellor 
Kent,  4  Com.  143,  states  the  doctrine 
thus:  'A  deed,  absolute  on  the  face 


of  it,  and  though  registered  as  a  deed, 
will  be  vaHd  and  effectual  as  a  mort- 
gage, as  between  the  parties,  if  it 
was  intended  by  them  to  be  merely 
a  security  for  a  debt,  and  this  would 
be  the  case,  though  the  defeasance 
was  by  an  agreement  resting  in  parol, 
for  parol  evidence  is  admissible  in 
equity  to  show  that  an  absolute  deed 
was  intended  as  a  mortgage,  and 
that  the  defeasance  has  been  omitted 
or  destroyed  by  fraud,  surprise,  or 
mistake.'  Story,  speaking  of  the 
same  subject,  says:  'Even  parol  evi- 
dence is  admissible  in  some  cases,  as 
in  cases  of  fraud,  accident,  and  mis- 
take, to  show  that  a  conveyance, 
absolute  on  its  face,  was  intended 
between  the  parties  to  be  a  mere 
mortgage  or  security  for  money' 
(2  Eq.  Jur.,  §  1018,  note  2)."— Per 
McAllister,  J.,  in  Ruckman  v.  Al- 
wood,  71  111.  155  (1873). 


PAROL    EVIDENCE  195 

Ga.  Code,  1911.  §  3258.  A  deed  or  bill  of  sale,  absolute  on  its 
face  and  accompanied  with  possession  of  the  property,  shall  not  be 
proved  (at  the  instance  of  the  parties)  by  parol  evidence  to  be  a 
mortgage  only,  unless  fraud  in  its  procurement  is  the  issue  to  be 

tried.  ^ 

1  Miss.  Ann.  Code,  1892,  §  4233,  is  to  the  same  effect. 


CHAPTER   III 

THE   OBLIGATION  SECURED 

Section  I.— Is  an  Obligation  Necessary?* 


BUCKLIN   V.   BUCKLIN 

Court  of  Appeals  of  New  York,  1864 

(1  Ahh.  App.  Cas.  242) 

_9LiyE  E  Bttckltn  brough^his  action  in  the  Supreme  Court 
against  WjlliaLa-aadJleacga_R:_BueMin,  to  foreclose  a  mortgage 
made  by  their  ancestor,  William  BuckHn^r. 

William  Euckhn,  Sr.Jand  his  wife,  E^her,  previous  to  his  ex- 
ecuting this  mortgage  had  separated,  and  she  had  filed  a  bill  in 
chancery  for  a  judicial  separation  {amehsaTet  thoro)  on  the  ground 
of  his  cruel  treatment  of  her^  In  the  bill  she  prayed  that  he  might 
Jb5^»il»'ll'-<1  to  maintain  her,  and  that  the  custody  of  their  infant 
daughter,  Olive  E.,  might  be  awarded  to  her.  Upon  the  bill  she_ 
obtained  an  injunction- restraining  him  from  molesting  the  child. 

In  order  to  compromise  the  controversy  and  stay  the  prosecution 
of  the  suit,  the  husband,  William  Bucklin,  Sr.,  agreed  to  make 
provision  for  the  support  of  his  wife  and  the  infant,  together,  and 
separate  from  himself,  and  convey  a  house  and  lot  to  the  child 
within  six  months. 

To  effect  this  settlement  the  mortgage  in  suit  was  executed  to 
Vedder  Green  (who  appeared  as  the  next  friend  of  the  wife  in  her 


1  "As  to  the  objection  that  there 
was  no  covenant  for  the  payment  of 
the  principal  or  interest,  he  said  that 
was  not  material;  the  same  not  being 
necessary  for  the  making  of  a  mort- 
gage, nor  yet  necessary  that  the 
right  should  be  mutual — viz.,  for  the 
mortgagee  to  compel  the  payment 
as  well  as  for  the  mortgagor  to  com- 
pel  a  redemption;   since  such   con- 

196 


veyance  as  in  the  present  case,  though 
without  any  covenant  or  bond  for 
the  payment  of  the  money,  would 
yet  be  plainly  a  mortgage." — Sir 
Joseph  Jekyll,  arguendo,  in  Floyer  v. 
Lavington,  \  P.  Wms.  268  (1714). 
See,  also,  Acton  v.  Acton,  Finch, 
Pre.  Ch.  237  (1704).  And  see  Lit., 
§  338,  and  Co.  Lit.,  209,  a,  b,  p.  6, 
supra. 


BUCKLIN    V.    BUCKLIX  197 

divorce  suit)  and  was  expressed  to  be  made  to  him  in  trust  for  the 
wife  and  infant  daughter. 

The  mortgage,  which  was  set  forth  in  the  complaint,  recited  the 
above  facts,  and  after  providing  for  the  said  support  of  the  wife 
and  daughter,  and  the  suspension  of  proceedings  in  the  suit,  with- 
out modification  or  discontinuance,  the  mortgage  contained  the 
following  language:  "Now,  for  the  purpose  of  securing  the  perform- 
ance by  the  said  Wilham,  of  the  aforesaid  agreements  and  cove- 
nants on  his  part  to  be  performed,  this  indenture  witnesseth — that 
the  said  William  Buckhn,  in  consideration  of  the  premises,  and  also 
in  consideration  of  the  sum  of  one  dollar,  paid  to  the  said  William 
by  the  said  Vedder  Green,  the  receipt  of  which  sum  is  hereby 
confessed  and  acknowledged,  hath  granted,  bargained,  sold," 
<fec.,  "and  doth  grant,"  &c.,  to  Vedder  Green  and  his  heirs  and 
assigns  forever  (here  was  inserted  the  description  of  the  lands; 
habendum  to  him,  his  heirs,  and  assigns,  forever),  "provided,  that 
if  the  said  William  Buckhn  shall  within  the  period  of  six  months 
convey  to  Olive  Esther  Bucklin  real  estate  of  the  value  of  one  thou- 
sand dollars,  to  consist  of  a  dwelHng,"  &c.,  and  if  he  shall  permit 
Esther  to  occupy  the  same  without  molestation,  and  if  he  shall  pay 
to  Esther  Bucklin  three  hundred  dollars  annually  during  their  joint 
hves,  and  shall  permit  the  said  Esther  Bucklin  to  have  the  custody, 
management,  &c.,  of  said  Olive  Esther  Bucklin,  without  any  inter- 
ference on  his  part  (and  if  he  should  also  perform  certain  other 
conditions  relating  to  personal  property),  then  this  indenture  shall 
be  void.  And  it  is  hereby  declared  that  this  mortgage  is  given  to 
Vedder  Green  in  trust  for  the  benefit  of  Esther  Bucklin  and  her  in- 
fant daughter,  Olive  Esther  BuckUn.  And  in  case  the  above  con- 
ditions on  the  part  of  said  William,  or  any  of  them,  shall  be  broken, 
and  it  shall  at  any  time  hereafter  be  necessary  to  enforce  this 
mortgage,  the  amount  that  shall  be  recovered  on  said  mortgage 
shall  be  recovered  for  the  benefit  of  the  said  Esther  and  her  infant 
daughter  or  the  survivor  of  them. 

The  complaint  then  averred  that  Bucklin,  Sr.,  wholly  failed  to 
convey  land  and  dwelling,  &c.,  as  he  agreed  (though  payment  of 
the  annuity  was  admitted),  and  demanded  judgment  for  the  fore- 
closure of  the  mortgage  for  the  sum  of  one  thousand  dollars,  the 
value  of  the  land  and  dwelhng  promised  to  be  conveyed,  and  in- 
terest, &c. 

When  the  mortgage  was  made,  in  1836,  the  child  (the  present 

\  plaintiff)  was  about  three  years  of  age.     The  trustee,   \"edder 

Green,  died  in  1841,  the  husband  and  wife  died  in  1843  and  1844. 


198  THE    OBLIGATION    SECURED 

( In  1857,  the  daughter,  coming  of  age,  procm-ed  an  order  of  court 
j  appointing  her  to  enforce  the  trust  and  bring  an  action  in  her  own 

/  name. 

The  defendants  were  heirs  of  the  mortgagor  in  posses- 
sion. 

The  judge  before  whom  the  cause  was  tried  sustained  the  mort- 
gage; found  that  the  husband  and  wife  never  afterward  cohabited, 
though  for  a  short  time  they  resided  in  the  same  house,  and  he 
gave  judgment  for  plaintiff  with  interest  from  the  date  of  the  mort- 
gage. 

The  Supreme  Court,  at  General  Term,  affirme4  this  judgment, 
holding  that  this  was  an  action  on  a  sealed  instrument,  and,  if  the 
cause  of  action  had  accrued  after  the  Code  of  Procedure  went  into 
effect,  it  would  have  been  governed  by  section  90  of  the  Code,  but 
that  as  it  had  accrued  before  that  time,  it  was  governed  by  2  R.  S., 
c.  8,  tit.  3,  art.  1,  §  9,  which  enacts  that  the  time  which  shall  have 
elapsed  between  the  death  of  any  person,  and  the  granting  of  let- 
ters testamentary  or  of  administration  on  his  estate,  shall  not  be 
deemed  any  part  of  the  time  Umited  by  any  law,  for  the  commence- 
ment of  actions  by  executors  or  administrators.  That  had  the 
trust  descended  to  the  personal  representatives  of  the  trustee,  this 
cause  of  action  would  have  been  saved  from  the  operation  of  the 
statute;  and  that  the  cestui  que  trust  should  not  be  prejudiced  by 
having  the  trust  fall  on  the  court  of  chancery,  as  it  did  on  the  death 
of  Green,  but  that  an  analogous  rule  should  be  apphed,  and  the 
whole  term  of  twenty-one  years  allowed  in  which  to  bring  the  ac- 
tion, which  would  prevent  it  from  being  barred. 

From  that  judgment  the  defendants  appealed  to  this 
court. 

By  the  Court:  Denio,  Ch.  J.    The  mortgage,  so  far  as  jl^jnow 
sought  to  be  enforced,  was  created,  among  other  objects,  to  secure 
^^plaintiff,  then  an  infant  of  tender  age,  a  portion  of  her  fatliCT's 
^^prnpprtv    to  aid  in  her  maintenance  "during' her  infancy,  and  to 
,-£umiskher  with  a  small  independent  estate  inreal  property.  """The- 
differences  which  had  arisen  between  her  parents  presented  the  oc- 
casion for  this  gift;  but  its  vaUdity  did  not  depend  upon  the  merits 
of  that  controversy,  nor  yet  upon  the  legal  effect  of  the  agreement 
for  a  separation  between  her  father  and  mother,  nor  upon  the  legal- 
ity of  the  provisions  made  by  the  former  for  the  latter.    The  con- 
tract, so  far  as  it  relates  to  that  provision,  has  either  been  per- 
formed or  it  is  now  incapable  of  performance.    The  party  entitled 


BUCKLIN    V.    BUCKLIN  199 

to  its  benefits  has  been  long  dead,  and  it  does  not  appear  that  she 
left  any  representative  capable  of  enforcing  any  of  its  stipulations 
which  were  not  performed  at  her  death.  Moreover,  this  suit  was 
not  brought  to  recover  such  interest.  But  the  plaintiff  survives, 
and  is  entitled  to  the  settlement  attempted  to  be  made  in  her  favor, 
provided  it  was  legally  valid  when  made,  and  provided  her  rights 
have  not  been  lost  by  lapse  of  time.^ 

1.  Where  the  rights  of  creditors  do  not  stand  in  the  way,  and 
there  appear  not  to  have  been  any  in  this  case,  it  is  perfectly  lawful 
for  a  parent  to  make  such  provision  out  of  his  estate  for  a  child  or 
children,  by  present,  gift  or  by  testament,  as  he  may  think  proper. 
There  are  cases  in  which  a  voluntary  executory  gift  will  not  be 
enforced  by  the  courts;  but  an  executed  one  is  as  valid  as  though 
based  on  a  full  pecuniary  consideration. 

A  mortgage  is  an  executed  conditional  transfer  of  the  real  estate 
mortgaged.  In  judgment  of  law,  any  conveyance  which  would~ 
be  sufficienT  to  pass  the  title  to  a  purchaser  conveys  it  to  the  mort- 
gagee. The  instrument  executed  by  William  Bucklin  to  \^eddet 
Green  w^ould  be  a  perfect  deed  of  bargain  and  sale  but  for  the  con- 
dition by  which  it  was  to  become  void  upon  performance  of  the 
agreement.  It  expresses  a  pecuniary  consideration  which,  though 
nominal,  is  as  adequate  to  waive  a  use  as  though  it  were  the  full 
value  of  the  land,  and  though  it  may  not  have  been  paid,  the 
defendant  is  estopped  by  his  deed  from  denying  its  payment.  By 
the  Revised  Statutes  it  is  denominated  a  grant;  but  for  all  substan- 
tial purposes  it  has  the  effect  of  a  deed  of  bargain  and  sale  (1  R.  S. 
738,  739,  §§  137,  138,  142).  At  common  law,  and  before  the  juris- 
diction of  courts  of  equity  to  relieve  against  forfeitures  had  been 
established,  this  deed  would  have  vested  in  the  trustee  an  estate  in 
fee  simple  defeasible  only  by  the  performance  of  the  conditions. 
This  is,  of  course,  a  technical  view  of  the  natm'e  of  a  mort- 
gage. 

By  applying  to  the  transaction  the  equitable  doctrines  of  thej 
courts  of  equity,  now  also  recognized  to  a  great  extent  by  the  courts 
of  law  and  by  modern  statutes,  the  mortgage  is  simply  a  security 
for  the  payment  of  the  money  it  was  given  to  secure,  and  the  mort- 
gagor continues  to  own  the  land,  while  the  mortgagee's  interest  is 
that  of  a  creditor  only. 

But  the  defendants'  position  is  formal  also.    They  insist  that 

*  The  second  portion  of  the  opinion,  of  time,  is  omitted,  the  conclusion 
•dealing  with  the  effect  of  the  lapse      being   reached   that   the  Statute  of 

Limitations  was  not  a  bar. 


200  THE   OBLIGATION   SECURED 

courts  of  equity  will  not  decree  the  performance  of  a  voluntary 
executory  agreement  even  where  the  subject  is  a  portion  intended 
for  a  child  or  other  relative,  and  authorities  are  referred  to  to  sus- 
tain that  position  {Duvoll  v.  Wilson,  9  Barb.  487,  and  cases  cited; 
but  see  Souverbye  v.  A7'de?i,  1  Johns.  Ch.  240,  266,  and  cases  re- 
ferred to  by  Chancellor  Kent).  If  the  settlement  be  an  executed 
one,  like  a  deed  or  mortgage,  the  doctrine  relied  on  has  no  applica- 
■  tion.  .The  title  of  the  mortgaged  premises  is  transferred  by  legal 
_conveyancg._  The  mortgagor  retains  an  equity  of  redemption, 
equivalent,  for  many  purposes,  to  a  general  ownership  of  the  land, 
but  yet,  in  point  of  form,  an  equity.  The  mortgagee  may,  it  is 
true,  come  into  a  court  of  equity  to  enforce  his  mortgage,  as  the 
mortgagor  must  in  order  to  redeem.  The  reason  why  a  mortgagee 
must  resort  to  equity  is  not  because  the  mortgage  is  an  executory 
transaction,  and  requires  the  aid  of  a  court  of  chancery  to  compel  a 
specific  performance.  On  non-performance  of  the  conditions  the 
mortgage  is  forfeited  at  law,  but  the  equity  of  redemption  remains 
in  the  mortgagor  or  his  representatives.  No  prospective  language 
of  the  parties  which  can  be  written  is  strong  enough  to  produce  the 
forfeiture  of  that  equity,  which  can  only  be  extinguished  by  a  de- 
cree, or  an  equivalent  proceeding,  under  a  positive  statute.  This 
rule  is  expressed  by  the  phrase,  "once  a  mortgage,  always  a  mort- 
gage." The  mortgagee  cannot  destroy  this  equity  except  by  a  suit 
in  chancery  or  a  statute  foreclosure.  Formerly,  he  could  bring 
ejectment  to  get  possession  of  the  estate,  after  forfeiture  at  law, 
but  that  is  now  forbidden  by  statute.  Still  if  he  can  be  got  into 
possession  without  a  breach  of  the  peace,  his  title  under  the  mort- 
gage deed  is  strong  enough  in  law  to  enable  him  to  defend  an  eject- 
ment brought  by  the  mortgagee  (Mickles  v.  Dillaye,  17  N.  Y.  80; 
Mickles  v.  Tow7isend,  18  id.  575).  The  plaintiff  brings  her  suit  in 
equity,  not  for  the  purpose  of  being  aided  in  establishing  her  mort- 
gage under  the  notion  of  remedying  a  defective  conveyance,  or 
obtaining  a  specific  performance,  but  to  foreclose  and  extinguish 
the  defendants'  equity  of  redemption,  which  a  court  of  law 
is  not  competent  to  deal  with.  She  does  not  come  to  estab- 
lish a  voluntary  equitable  agreement,  but  to  enforce  a 
legal  title  under  an  executed  conveyance,  and  to  cut  off 
an  equity  attached  to  that  legal  title  and  vested  in  the  de- 
fendants. 

I  think,  therefore,  that  the  instrument  contained  a  valid  mort- 
gage of  the  land  described  in  it,  and  that  it  was  an  available  security 
for  the  performance  of  the  contract  to  purchase  and  convey  lands 


CAMPBELL    V.    TOMPKINS  201 

to  the  value  of  one  thousand  dollars  to  and  for  the  benefit  of  the 
plaintiff. 
H.  R.  Selden,  J.,  was  absent.    All  the  other  judges  concurred. 

Judgment  affirmed,  with  costs.^ 


CAMPBELL  V.   TOMPKINS 

Court  of  Chancery  of  New  Jersey,  1880 

(32  N.  J.  Eg.  170) 

^BiLL  to  foreclose.     On  final  hearing  on  pleadings  and  proofs. 

The  Chancellor  [Runyon].  This  suit  isbrought^laforeclose 
a  mortgage  given,  October  13th,  1868,  by  Daniel  F.^Tompkins  and 

~lii^  wife  to  the  complainant^on  land]or^[i^rTompkins^  to  secure, 
the  pa:p.iicnt.  nocoicdingto  the  bond  of  Mr.  TompEnsto  the  com- 
plainant,  of  that  date,  of  $2100  in  one  year  from  the  date  thereof, 
with  mterest,  and  all  national,  state,  county,  city  and  township 

"^axes  wiiTTTh  might  be  assessed  upon  the  money  loaned  andthereby 
Secured  or  upjm-themogtgage  or  bond.  The  defense  set  up  by  the  I 
mortgagors  in  their  answer  is,  that  only  $1100  were  lent,  and  the 
rest  of  the  $2100  was  an  allowance  by  way  of  compensation  for  the 
trouble  and  expense  to  which  the  firm  of  Campbell,  Lane  &  Co. 
(of  which  the  complainant  was  a  member  and  for  which  the  bond 
and  mortgage  were  taken,  though  taken  in  the  name  of  the  com- 
plainant alone)  had  been  subjected  by  reason  of  the  defense  made 
by  the  firm  of  Nichols  &  Tompkins  (of  which  Mr.  Tompkins  was 
a  member),  against  certain  promissory  notes  put  by  the  latter 
firm  on  the  money  market,  and  bought  by  Campbell,  Lane  &  Co. 
The  notes  amounted  in  the  aggregate  to  over  $7000.  The  result 
of  the  litigations  was  that  Campbell,  Lane  &  Co.  recovered  only 
what  they  had  paid  for  the  notes,  with  interest.  The  litigations 
were  ended  and  the  money  for  which  judgment  was  recovered 
therein  paid  before  the  mortgage  was  given. 

When  the  agreement  for  the  mortgage  was  made,  Mr.  Tompkins 
applied  to  the  complainant  for  a  loan  of  $1000  on  mortgage  of  the 
premises  described  in  the  mortgage.  Wholly  of  his  own  accord,  and 
without  suggestion  from  the  complainant,  or  any  member  of  his 
firm,  or  any  one  else  on  his  or  their  account,  Mr.  Tompkins  pro- 

'  Accord.,  Brigham  v.  Brown,  44  "A  man  may  give  a  voluntary  mort- 
Mich.    59    (1880),    per   Cooley,    J.:       gage  if  he  chooses  "  (p.  62). 


202  THE    OBLIGATION    SECURED 

posed  that  if  the  loan  was  made  the  mortgage  would  be  given  for 
such  an  amount  as  to  include  a  sum  sufficient  to  compensate  Mr. 
Campbell's  firm  for  their  expense  and  trouble  in  prosecuting  the 
suits  upon  the  notes.  This  proposition  was  wholly  voluntary  on 
his  part,  and  the  amount  of  the  proposed  compensation  ($1000) 
was  fixed  by  him. 

Mr.  Campbell  acceded  to  the  proposition  thus  made,  and  made 
the  desired  loan,  the  amount  of  which  was,  at  the  request  of  Mr. 
Tompkins,  raised  from  $1000  to  $1100,  and  took  the  mortgage.  In 
1876,  before  the  commencement  of  this  suit,  the  complainant 
bought  the  interest  of  his  partners  in  the  mortgage,  so  that  when 
this  suit  was  brought  he  was  the  sole  owner  of  the  mortgage. 

By  their  answer,  Mr.  and  Mrs.  Tompkins  insist  that,  as  to  the 
$1000  included  in  the  mortgage  as  compensation  for  expense, 
trouble,  &c.,  in  the  litigations  on  the  notes,  thp  Tnnrtgagejvasjvith- 
,.^t^consideration^_.aj}jd-that,  thcyeforej^ttiere^  should  be  no  decree 
—for  t£a0^ioiigy;  or,  if  there  should  be  any  decree  on  that  account,  it 
should  be  for  a  smaller  sum.  They  insist  that  $1000  was  an  un- 
reasonably large  allowance  on  that  account.  Neither  in  the  answer 
nor  in  the  testimony  is  any  fraud  alleged  or  even  hinted  at.  The 
conduct  of  the  complainant  appears  to  have  been  entirely  fair.  Nor 
is  it  alleged  that  any  manner  of  deceit  or  misrepresentation  was 
practised  on  Mrs.  Tompkins,  nor  that  she  was  not  fully  apprised  of 
all  the  particulars  of  the  transaction  which  resulted  in  the  mort- 
gage. The  only  question,  therefore,  is,  whether  the  defence  of  want 
of  consideration  is  available  to  the  mortgagors. 

The  seals  to  the  bond  and  mortgage  import  a  consideration,  and, 
before  the  passage  of  the  act  "concerning  sealed  instruments," 
which  was  approved  April  6th,  1875  (Rev.  p.  387),  neither  a  court 
of  law  nor  equity  would  allow  the  consideration  of  such  instru- 
ments to  be  inquired  into  with  a  view  to  declaring  the  instrument 
'  void  for  want  of  consideration,  but  a  court  of  equity  would  do  so 
for  the  purpose  of  ascertaining  what  was  due  upon  it  {Farnum  v. 
Burnett,  6  C.  E.  Gr.  87).  That  act  provides  that  in  every  action 
upon  a  sealed  instrument  or  where  a  set-off  is  founded  upon  a  sealed 
instrument,  the  seal  thereof  shall  be  only  presumptive  evidence  of  a 
sufficient  consideration,  which  may  be  rebutted  as  if  such  instru- 
ment was  not  sealed.  That  act  is  a  mere  change  of  the  rule  of  evi- 
dence and  does  not  operate  to  make  a  valuable  consideration  neces- 
sary where  the  requisite  did  not  exist  when  the  contract  was  made 
{Aller  V.  Aller,  11  Vr.  446). 

As  before  stated,  the  mortgage  in  this  case  was  given  in  1868, 


CAMPBELL   V.    TOMPKINS  203 

prior  to  the  passage  of  that  act.  It  cannot  be  doubted  that  even! 
now  a  valid  mortgage  may  be  given  where  no  valuable  considera- 
tion exists.  Otherwise,  the  absolute  control  of  the  owner  over  his 
property  is  taken  away,  for  he  would  not  be  permitted  to  give  it 
away  in  his  lifetime  by  deed.  The  mere  fact  that  there  was  no  con- 
sideration would  not  now  render  the  mortgage  invalid.  A  mortgage  \ 
may  be  sustained  as  against  all  except  creditors  whose  claims  ex-  | 
isted  at  the  time  of  giving  it,  although  it  was  intended  merely  as  a  1 
gift;  and,  when  executed  and  delivered,  it  is  as  valid  as  if  it  were  ) 
based  upon  a  full  consideration,  and  it  is  not  open  to  the  objection 
that  it  is  a  voluntary  executory  agreement,  but  it  may  be  enforced 
according  to  its  terms  as  an  executed,  conditional  transfer  of  the 
real  estate  mortgaged  (Brooks  v.  Dalrymple,  12  Allen,  102;  Bucklin 
V.  BuckUn,  1  Abb.  App.  Dec.  242;  Jones  on  Mort.,  §  614). 

In  this  case  there  was  no  fraud,  illegality  or  oppression.  The 
act  of  the  mortgagors  in  giving  the  mortgage  to  secure  the  payment 
of  the  compensation,  was  entirely  voluntary  and  was  the  result  of 
Mr.  Tompkins's  unsohcited  and  uninvited  proposition.  He  made 
it  part  of  the  consideration  of  the  loan  which  he  solicited,  and  it  is, 
perhaps,  not  too  much  to  say  that  without  this  inducement  the  loan 
would  not  have  been  made. 

The  voluntary  mortgage  by  the  wife  of  her  land  to  secure  the 
payment  of  her  husband's  bond  is  binding  upon  her  not  only  so  far 
as  the  loan  is  concerned,  but  as  to  the  debt  voluntarily  created  by 
him  against  himself  and  arising  from  a  merely  moral  obligation 
which  he  acknowledged  without  demand  or  even  solicitation,  but 
solely  from  his  sense  of  justice.  A  married  woman  may,  with  her 
husband,  mortgage  her  land  to  secure  the  payment  of  the  debt  of 
her  husband  or  of  any  other  person,  for  the  payment  of  which  she  is 
in  no  way  liable  and  in  which  she  has  no  interest  (Jones  on  Mort., 
§  113).  And  her  mortgage,  given  to  secure  the  payment  of  the 
bond  of  her  husband,  will  not  be  regarded  as  having  no  validity  or 
binding  effect  simply  because  the  consideration  of  the  bond  is  an 
obligation  merely  moral  and  not  enforceable  at  law  or  in  equity.^ 

There  will  be  a  decree  in  accordance  with  these  views. 

iSee   also  Riley  v.  Hopkinson,  82  N.  J.  Eq.  469  (1913). 


204  THE    OBLIGATION    SECURED 

BAIRD   V.   BAIRD 

Court  of  Appeals  of  New  York,  1895 

(145  A^.  Y.  659) 

Appeals  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  tlie^fifth  judicial  department,  entered  upon  orders  made 
October  2,  1894,  which  affirmexLjudgments  in  favor  of  defefldaints 
entered  upon  decisions  of  the  special  county  judge  of  Monroe 
County  on  trial  at  Special  Term,  dismissing  the  complaint  in  each 
action. 

The  following  is  the  opinion  in  full : 

"Prior  to  the  year  1873,  John  Baird,  the  plaintiff's  husband 
and  testator,  was  the  owner  of  the  farm  which  is  covered  by  the 
two  mortgages  sought  to  be  foreclosed  in  these  actions.  In  that 
year,  his  two  sons,  William  and  James,  defendants,  went  into 
possession  of  it,  and  the  father  directed  the  assessors  to  transfer 
the  assessment  on  the  farm  to  his  sons.  They  have  remained  in 
possession  ever  since.  In  October,  1874,  the  father  deeded  the 
farm  to  the  sons,  who  took  title  under  these  deeds  as  tenants  in 
common.  It  appeared  that  the  father  had  two  other  farms,  all  of 
which  had  been  paid  for  and  improved  with  the  aid  of  the  labor 
and  services  of  his  sons,  who  had  worked  for  him  after  their  ma- 
jority. On  a  settlement,  between  the  father  and  the  two  sons,  it 
was  agreed  that  he  was  indebted  to  them  in  the  sum  of  $5000,  and 
that  was  the  consideration  for  the  conveyance.  A  deed  was  given 
to  each  son  conveying  an  undivided  half  of  the  farm  in  considera- 
tion of  $2500.  The  evidence  tended  to  show,  and  the  trial  court 
has  found,  that  the  intention  was  to  vest  the  title  in  the  sons  in 
fee;  but  it  appears  that  the  father  had  some  fears  that  his  sons 
would  not  be  able  to  take  care  of  the  property  thus  conveyed  and 
that  it  might  be  lost  in  speculation  or  otherwise.  In  order  to 
prevent  such  a  result,  as  he  said,  he  required  the  sons  to  give  back 
to  him  mortgages  for  $1500  each  on  the  farm.  No  bond  was  give 
and  no  actual  debt  was  intended  to  be  secured,  and  they  were  not 
recorded  by  the  father  in  his  lifetime.  With  respect  to  the  pur- 
pose and  consideration  of  these  mortgages  the  testimony  tended  to 
show,  and  the  trial  court  found,  that  they  were  not  intended  to 
secure  any  debt  or  to  be  or  become  a  valid  subsisting  security,  or  to 
be  recorded  or  enforced,  and  were,  in  fact,  without  any  considera- 
tion whatever.     In  the  year  1875  the  wife  of  John  Baird,  and 


BAIRD    r.    BAIRD  205 

mother  of  the  defendants,  died,  and  the  year  following  he  mar- 
ried the  plaintiff.  He  died  in  1883,  leaving  a  will,  in  which  the 
plaintiff  was  named  as  executrix.  In  that  capacity  she  brought  ac- 
tions against  each  of  the  sons  to  foreclose  the  mortgages  given  by 
them  respectively.  The  complaint  was  dismissed  in  each  case  and 
the  judgments  were  affirmed  at  General  Term.  There  are  two 
appeals  and  two  records,  but  both  judgments  rest  on  precisely  the 
same  facts,  and  the  questions  involved  in  both  appeals  are  identical. 
Both  cases  may,  therefore,  be  conveniently  considered  and  disposed 
of  as  one. 

"The  plaintiff's  right  to  enforce  the  mortgage  is  the  same  and 
no  other  than  the  mortgagee,  her  husband  and  testator,  had  in  his 
lifetime.  She  stands  in  the  place  of  her  husband,  and  cannot  en- 
force the  instrument  unless  he  could,  and  every  defense  that  the 
defendants  could  urge  against  the  mortgage  during  the  hfe  of  the 
father,  they  may  interpose  now  against  his  personal  representative. 
The  instruments  purport  to  have  been  given  to  secure  the  payment 
of  money,  but  it  was  shown  at  the  trial  affirmatively,  and  found 
by  the  trial  court,  that  no  debt  in  fact  existed  in  favor  of  the  father 
against  either  of  the  sons;  that  there  was  no  intention  to  give  the 
mortgage  on  the  one  hand,  or  to  hold  it  on  the  other,  as  security 
for  any  debt;  that  in  fact  there  was  no  legal  or  equitable  considera- 
tion moving  between  the  parties  and  no  intention  on  either  side 
to  treat  the  instruments  as  binding  obligations  or  as  valid  or  sub- 
sisting securities.  The  evidence  upon  which  these  findings  were 
made,  if  competent,  was  sufficient  and  the  fact  is  not  open  to 
question  or  review  here. 

"The  findings  are  based  upon  the  business  relations  which  the 
parties  occupied  to  each  other  before  the  father  gave  up  the  posses- 
sion of  the  farm  to  the  sons  and  then  conveyed  it  to  them,  taking 
back  the  mortgages  in  question,  and  upon  his  subsequent  conduct 
and  declarations  as  to  the  character  of  the  instruments  and  the 
purpose  of  their  execution  and  delivery.  The  general  principle 
that  an  instrument  under  seal,  in  the  form  of  a  mortgage  upon 
real  estate,  which  upon  its  face  expresses  a  consideration  and  pur- 
ports to  have  been  given  as  security  for  a  debt  may,  nevertheless, 
as  between  the  parties,  be  shown  to  have  been  purely  voluntary  or 
without  any  consideration,  and  so  invalid, }is  not  denied  (Davis  v. 
Bechstein,  69  N.  Y.  440;  Hill  v.Hoole,  116  id.  299;  Briggs  v.  Lang- 
fcrrl,  107  id.  680;  Thomas  on  Mort.,  §  847;  Jones  on  Mort.,  §  1297). 

"The  point  upon  which  the  learned  counsel  for  the  plaintiff 
relies  is  that  evidence  was  not  admissible  at  the  trial  to  wholly 


206  THE    OBLIGATION    SECURED 

contradict  and  defeat  the  instruments  by  showing,  contrary  to 
what  appeared  on  their  face,  that  they  were  intended  to  have  no 
operation  whatever.  It  is  sought  to  distinguish  this  case  from 
that  of  a  deed,  absolute  upon  its  face,  which  may  be  shown  to  be 
in  fact  a  mortgage,  and  from  the  numerous  other  cases  in  which 
equity  permits  a  party  to  show  that  an  instrument,  appearing 
upon  its  face  to  be  of  one  character,  is  or  ought  to, be  in  truth  of 
quite  another  character.  It  is  said  that  the  principle  upon  which 
these  cases  rest  gives  no  sanction  to  what  was  held  by  the  court 
below  in  this  case,  that  a  party  may  impeach  his  deed  by  show- 
ing, not  only  that  it  was  without  consideration,  but  that  it  was 
intended  to  have  no  vaHdity  or  become  of  any  binding  force  what- 
ever. 

"The  desire  on  the  part  of  the  father  to  retain  some  sort  of 
guardianship  over  the  title  to  the  farm  which  he  had  conveyed  to 
the  defendants  was,  perhaps,  natural  enough  under  the  circum- 
stances, and  it  is  frequently  shown  in  such  transactions.  That 
the  mortgages  were  not  intended  to  be  held  by  him  for  any  other 
purpose  is  supported  by  the  circumstances  that  no  bond  was  given, 
that  they  were  not  recorded,  and  no  claim  was  made  by  the  mort- 
gagee during  his  life,  a  period  of  about  nine  years,  that  they  were 
in  his  hands  for  any  other  purpose  or  for  the  pajonent  of  either 
principal  or  interest  though  past  due.  All  the  circumstances, 
when  considered  with  the  proof  of  the  statements  and  declarations 
of  the  father,  were  sufficient  to  warrant  the  findings  of  the  trial 
court  with  respect  to  the  real  purpose  with  which  the  instruments 
were  made  and  their  true  consideration  {Holmes  v.  Roper,  141 
N.  Y.  67;  Lyon  v.  Richer,  id.  225).  ''The  presumption  of  some 
consideration  that  arose  from  the  presence  of  a  seal  was  overthrown, 
and  we  must  assume  that  the  instruments  were  without  considera- 
tion of  any  kind  {Gray  v.  Barton,  55  N.  Y.  68;  Best  v.  Thiel,  79  id. 
15;  Torry  v.  Black,  58  id.  185;  Home  Ins.  Co.  v.  Watson,  59  id. 
395;  Dubois  v.  Hermance,  56  id.  673). 

"There  is  no  reason  that  we  can  perceive  for  giving  to  these 
instruments  any  greater  force  or  effect  than  was  contemplated  by 
the  parties  when  they  were  executed  and  delivered.  There  is  no 
estoppel  or  any  right  which  attached  in  favor  of  third  parties,  and 
we  are  not  aware  of  any  principle  which  would  now  require  a  court 
of  equity  to  treat  these  instruments  as  vaUd  subsisting  obligations 
unless  they  were  intended  as  such  when  made,  and  this  is  negatived 
by  the  findings. 

"Xor  do  we  perceive  any  good  reason  why  the  real  purpose  and 


BAIRD    i'.    BAIRD  207 

true  consideration  and  object  of  the  mortgages  should  not  be  made 
to  appear  when  the  aid  of  a  court  of  equity  is  invoked  for  their 
enforcement.  The  authority  relied  upon  by  the  learned  counsel 
for  the  plaintiff  in  support  of  his  contention  is  a  remark  of  Judge 
Rapallo  in  the  ease  of  Hidchins  v.  Hutchins,  98  X.  Y.  56,  in  which 
it  is  said:  'It  has  never  been  held  that  a  deed  can  be  so  far  con- 
tradicted by  parol  as  to  show  that  it  was  not  intended  to  operate 
at  all,  or  that  it  was  the  intention  or  agreement  of  the  parties  that 
the  grantee  should  acquire  no  right  whatever  under  it,  or  that  he 
should  reconvey  to  the  grantor  on  his  request  without  any  consid- 
eration.' 

"That  remark  must  be  understood  with  reference  to  the  facts 
of  the  case  then  under  consideration,  which  was  the  case  of  a  deed 
absolute  in  form  but  intended  as  a  mortgage.  The  defendant's 
answer  was,  however,  so  drawn  as  to  leave  room  for  the  construc- 
tion that  he  intended  to  urge  that  the  conveyance  was  intended 
to  be  wholly  inoperative,  or  in  trust,  or  to  secure  a  debt  which  the 
parties  had  agreed  should  never  be  paid,  and  it  was  with  refeience 
to  this  feature  of  the  case  that  the  expression  was  used.  It  was 
applicable  to  the  case  then  under  review,  but  cannot  be  regarded 
as  authority  for  the  proposition  that  the  defendants  in  this  case 
are  precluded  from  showing  that  the  mortgages  were  without  any 
consideration  in  fact,  or  that  they  were  not  intended  by  any  of  the 
parties  to  have  the  effect  of  incumbering  or  defeating  the  title 
which  the  father  had  just  conveyed  to  his  sons.  The  rule  which 
excludes  evidence  of  parol  negotiations  or  conditions,  when  offered 
to  contradict  or  substantially  vary  the  legal  import  of  a  written 
agreement,  does  not  prevent  a  party  to  the  agreement,  in  an  action 
between  the  parties,  from  showing,  by  way  of  defense,  the  existence 
of  a  contemporaneous  oral  agreement,  made  at  the  time  the  writing 
was  executed  and  delivered,  which  would  render  the  use  of  the 
written  instrument,  for  any  purpose  contrary  to  or  inconsistent 
with  the  oral  stipulation,  dishonest  or  fraudulent  {Juilliard  v.  v 
Chaffee,  92  N.  Y.  529).  The  consideration  of  a  written  instru-  \ 
ment  is  always  open  to  inquiry,  and  a  party  may  show  that  the 
design  and  object  of  the  agreement  was  different  from  what  the 
language,  if  alone  considered,  would  indicate  {id.).  Parol  evi- 
dence may  also  be  given  to  show  that  a  writing,  purporting  to  be 
a  contract  or  obhgation,  was  not  in  fact  intended  or  delivered  as 
such  by  the  parties  {Grierson  v.  Mason,  60  N.  Y.  394).  So,  a  con- 
veyance absolute  in  form  may  be  shown,  as  against  the  heir  at  law 
of  the  grantee,  to  have  been  made  in  trust  for  the  benefit  of  a 


208  THE    OBLIGATION    SECURED 

partnership  firm,  of  which  the  grantee  was  a  member,  and  so  held 
by  him  in  trust  for  the  firm  (Bank  v.  Grote,  110  N.  Y.  12).  Of 
course  there  may  be  cases  where  the  rights  of  innocent  third  par- 
ties intervene  to  modify  or  change  the  rules,  as  in  the  case  of  nego- 
tiable instruments,  or  where  there  exists  some  element  v>f  estoppel, 
but  as  between  the  parties  to  the  instrument  there  is  no  reason  why 
the  truth,  with  respect  to  the  real  object  and  consideration  of  tht. 
instrument,  may  not  be  made  to  appear.  The  plaintiff  was  not 
entitled  to  maintain  the  actions  for  the  foreclosure  of  the  mortgages 
unless  it  was  found  that  there  was  some  debt  due  to  her  for  the 
payment  of  which  they  were  the  security.  The  findings  are  that 
no  debt  ever  existed,  and  this  is  conclusive  against  the  plaintiff's 
right  of  action.  In  an  action  to  enforce  a  mortgage  by  sale  of  the 
land  the  amount,  if  anything,  of  the  lien  is  an  issue  which  the  par- 
ties certainly  have  the  right  to  contest.  It  is  the  debt  which 
gives  the  mortgage  vitality  as  a  charge  upon  the  land,  and  gener- 
ally where  there  is  no  debt  or  obligation  there  is  no  subsisting  mort- 
gage. The  instruments  contain  a  consideration  clause  and  a  seal, 
and  much  of  what  has  been  said  by  courts  and  writers  to  the  effect 
that  a  party  cannot  be  permitted  to  defeat  his  own  deed  by  parol 
proof  is  based  upon  the  importance  which  was  attached  to  the  pres- 
ence of  these  conditions  in  an  instrument  by  the  common  law.  The 
conception  that  some  consideration  was  necessary  to  support  every 
promise  and  covenant  was  borrowed  from  the  civil  law,  but  the 
consideration  was  formerly  deemed  to  be  conclusively  established 
by  the  presence  of  the  consideration  clause  or  the  seal.  It  was 
originally  supposed  that  the  recitals  and  clauses  of  a  contract  ex- 
pressing a  consideration  could  not  be  varied  by  parol  proof  to  the 
contrary,  but  that  rule  was  gradually  abandoned  and  now  that 
clause  is  open  to  parol  proof  (McCrea  v.  Purmot,  16  Wend.  460; 
Hebbard  v.  Haughian,  70  N.  Y.  54;  Ham  v.  Van  Orden,  84  id. 
269).  So  also,  the  conclusive  presumption  of  a  consideration 
which  formerly  arose  from  the  presence  of  a  seal  was  modified 
by  statute,  and  it  is  now  open  to  the  maker  of  such  an  instrument 
to  allege  and  prove  the  al:»sence  of  any  consideration  in  fact  as  a 
defense  (3  R.  B.  [5th  ed.]  691,  §§  77,  78;  Code,  §  840).^ 

"There  are,  it  is  true,  expressions  to  be  found  in  some  cases  to 

1  Section    840   of   the   New    York  which  may  be  rebutted,    as  if   the 

Code  Procedure  reads:  "A  seal  upon  instrument  was  not  sealed." 

an   executory   instrument,    hereafter  See   article,    "The    Magic   of    th(! 

executed,    is  only   presumptive   evi-  Private    Seal,"    by    Justice    Crane, 

dence  of  a  sufficient   consideration,  15  Col.  Law  Rev.  24  (1915). 


BAIRD    V.    BAIRD  209 

the  effect  that  while  the  question  of  consideration  is  open  to  be 
varied  by  parol  proof,  yet  the  party  cannot  be  permitted  to  claim 
that  a  deed  or  other  instrument  with  a  consideration  clause  or  a 
seal,  or  both,  is  wholly  without  consideration,  and  thus  entirely 
defeat  it.  If  the  idea  is  anything  more  than  a  somewhat  shad- 
owy and  fanciful  remnant  of  the  ancient  law,  it  is  not  easy  to  de- 
fine its  precise  scope  or  practical  appHcation  when  applied  to  an 
executory  instrument  like  a  mortgage.  To  say  that  in  a  ca.-e  like 
this  it  is  open  to  the  defendant  to  reduce  by  parol  proof  the  sum 
expressed  as  the  consideration  to  one  dollar  or  any  other  nominal 
sum,  but  that  he  cannot  go  any  farther,  would  be  to  confess  that 
the  distinction,  if  it  exists,  is  altogether  without  substance.  The 
instrument  would  be  defeated  in  either  case.  It  is  quite  certain 
that  by  recent  adjudications  deeds  and  other  instruments  have  been 
defeated,  in  a  great  variety  of  cases,  by  parol  proof  of  want  of 
consideration,  or  that  they  were  deUvered  upon  conditions  which 
would  render  their  use  for  any  other  object  a  fraud  upon  the 
maker,  or  that  the  purpose  for  which  delivery  was  made  was  dif- 
ferent from  that  indicated  upon  their  face.  It  will  be  sufficient 
to  refer  to  some  of  the  cases  without  further  comment:  Reynolds 
v.  Robinson,  110  N.  Y.  654;  Blewitt  v.  Booriim,  142  id.  357;  An- 
drews V.  Brewster,  124  id.  433.  So,  also,  actions  to  foreclose  mort- 
gages have  been  defeated  upon  allegations  and  proof  differing 
in  no  substantial  respect  from  that  appearing  in  this  case  {Briggs 
V.  Longford,  107  N.  Y.  680;  Hannan  v.  Hannan,  123  Mass.  441; 
Wearse  v.  Peirce,  24  Pick.  141;  Hill  v.  Hoole,  116  N.  Y.  299; 
Davis  V.  Bechstein,  69  id.  440;  Parkhurst  v.  Higgins,  38  Hun, 
113).  There  may  be  cases,  no  doubt,  where  the  party  will  be  held 
estopped  by  his  deed  from  claiming  that  it  is  void  for  want  of 
consideration,  especially  where  by  its  terms  it  appears  to  be  an  ab- 
solute conversance  of  land  {Matter  of  Mitchell,  61  Hun,  372).  A 
voluntary  conveyance,  intended  to  take  effect  as  such,  and  not 
executory,  is  generally  good  between  the  parties  without  actual 
consideration,  but  that  principle  has  no  application  to  this  case. 
It  is  not  quite  correct  to  say  that  the  defendant  was  permitted  to 
show  Ijy  parol  that  these  instruments  were  never  to  have  any  opera- 
tion or  effect.  They  were  in  fact  executed  and  delivered  for  a 
purpose,  though  not  to  secure  the  payment  of  money,  and  they  may 
have  accomplished  the  very  object  contemplated.  That  was  to 
protect  the  defendants  against  their  own  improvidence  in  contract- 
ing debts  upon  the  faith  of  their  title  to  the  farm.  Whether  that 
purpose  was  lawful,  or  practicable,  or  possible,  or  the  contrary,  is 


210  THE    OBLIGATION    SECURED 

quite  foreign  to  the  inquiry.  It  is  enough  to  know  that  such  was 
the  motive  and  consideration  in  the  minds  of  all  the  parties  which 
induced  the  execution  and  delivery,  and  no  other.  Having  pro- 
cured them  in  that  way,  it  would  be  unconscionable  now  for  the 
mortgagee  or  his  personal  representative  to  use  or  enforce  them  as 
obligations  for  the  payment  of  money. 

"The  defendants  had  been  in  possession  of  the  farm  under  the 
final  contract  between  them  and  their  father  to  convey  it  to  them, 
in  consideration  of  the  amount  found  due  upon  the  settlement, 
for  more  than  a  year  before  the  deeds  or  mortgages  were  given. 
During  that  time  they  were  in  a  position  to  enforce  specific  perform- 
ance, and  hence  the  execution  and  delivery  of  the  mortgages  were 
purely  voluntary  acts  on  their  part,  and  constituted,  so  far  as  ap- 
pears, no  element  of  the  consideration  for  the  deeds. 

"The  acts  and  declarations  of  the  mortgagee  with  respect  to  the 
consideration,  conditions  and  purpose  under  which  the  instruments 
were  made  and  delivered,  being  admissions  against  his  interests, 
would  have  been  competent  proof  against  him  in  a  suit  to  enforce 
the  mortgages  in  his  lifetime,  and  hence  are  now  competent  against 
the  plaintiff  who  represents  him  {Holmes  v.  Roper,  141  N.  Y.  67; 
Lyon  v.  Richer,  id.  225;  Hobart  v.  Hobart,  62  id.  80). 

"We  think  there  was  no  error  in  the  result  and  that  the  judg- 
ments should  be  affirmed,  with  costs." 

O'Brien,  J.,  reads  for  affirmance. 

Bartlett,  J.,  concurs;  Peckham  and  Gray,  JJ.,  concur  in  the 
result;  Andrews,  Ch.  J.,  dissents;  Haight,  J.,  not  sitting. 

Judgments  affirmed. 

COOK  V.   BARTHOLOMEW 

Supreme  Court  of  Connecticut,  1891 

(60  Conn.  24) 

Carpenter,  J.  This  is  a  suit  for  the  foreclosurejaf  n  mnrtgagp,. 
_with  the  alleged  mortgage  annexed  as  an  exhibit.  The  mortgage 
is  in  two  parts — an  ordinary  deed  for  the  consideration  of  $900, 
duly  executed  to  convey  real  estate,  and  a  condition  thereto 
attached,  of  the  same  date,  and  signed  by  the  grantor,  as  follows: 
"The  said  Bostwick,  for  the  consideration  named  in  the  within 
deed,  covenants  and  agrees  with  said  Charles  Cook  as  such  con- 
servator, that  he  will  receive  said  Sarah  A.  Bostwick  into  his  care 
and  keeping  during  the  term  of  her  natural  life,  that  he  will  provide 


COOK    V.    BARTHOLOMEW  211 

for  all  her  wants  in  a  reasonable  and  proper  way,  will  provide  her 
with  all  needed  food,  drink  and  clothing,  have  a  room  and  fire  when 
needed,  lodging  and  every  necessary  comfort,  both  in  sickness  and 
health,  and  at  her  decease  give  her  decent  and  proper  burial, 
and  erect  tombstones  at  her  grave  with  a  suitable  inscription 
thereon,  within  one  year  after  her  decease,  said  tombstone  to  be  of 
a  value  of  not  less  than  fourteen  dollars.  Now,  therefore,  if  said 
Bostwick  shall  well  and  truly  perform  all  and  every  of  the  above 
covenants  and  stipulations  faithfully,  then  this  deed  to  be  void, 
otherwise  to  remain  in  full  force  and  effect  in  law." 

The  complainant  also  alleges  that  the  defendant,  Bostwick, 
subsequently  conveyed  his  interest  in  the  premises  to  the  defendant, 
Jones,  and  that  Jones  conveyed  his  interest  to  the  other  defendant, 
Bartholomew.    The  defendants  demurred,  and  the  case  is  reserved. 

Whether  the  instrument  sued  on  is  or  is  not  a  mortgage  is  the 
principal  question  in  the  case.  What  is  a  mortgage?  '^Amort- 
gage  is  a  contract  of  sale  executed,  with  power  to  redeem.  .  .  . 
'Hie  condition  of  a  mortgage  may  be  the  pa-yTnent  of  a  debt,  the 
indemnity  of  a  surety,  or  the  doing  or  not  doing  any  other  act. 
T^hp  TTinst  pnmmnii  i-ppthod  is  in  I'nsprt  the  condition  in  the  deed, 
but  it  may  as  well  be  done  by  a  separate  instrument  of  defeasance 
executed  at  the  same  time._.  .  .  .X~bnnr|  ornote  is  usually  taken 
for  the  debt,  which  is  described  in  the  deed,  with  a  condition  that 
ii^the  debt  is  paid  by  tne  timejiie  deed  shall  be  void.  In  such 
case  the  mortgage  is  called  a  collateral  security  for  the  debt.  In 
like  manner  an  engagement  to  indemnify,  or  any  other  agreement, 
may  be  described  in  the  mortgage  deed."  2  Swift's  Digest,  182, 
183.  "To  constitute  a  mortgage  the  conveyance  must  be  made  to 
sppi^rplhp  pRynr^ent  ot  a  debt..''  bacon  v.  Brown,  19  Conn.  29. 
"A  conveyance  of  lands  by  a  debtor  to  a  creditor  as  a  security 
for  the  pajnment  of  the  debt."    Jarvis  v.  Woodruff,  22  Conn.  548. 

What  is  a  debt?  Amon  Bostwick  received  $900  from  the  plain- 
tiff, in  consideration  of  which  he  agreed  to  support  Sarah  A.  Bost- 
wick during  life,  and  at  her  death  to  bury  her  and  to  erect  a  tomb- 
stone to  her  memory.  To  secure  the  performance  of  this  agree- 
ment he  executed  this  deed,  with  a  condition  that  the  deed  should 
be  void  if  the  agreement  should  be  performed.  He  assumed  a  duty 
which  may  be  aptly  described  as  a  debt.  He  executed  a  deed  of 
real  estate  as  collateral  security  for  the  performance  of  that  duty — 
the  payment  of  that  debt.  The  obligation  falls  within  an  approved 
definition  of  debt,  and  the  conveyance  is  within  the  legal  definition 
of  a  mortgage. 


212  THE    OBLIGATION    SECURED 

There  is  no  force  in  the  objection  that  this  cann;jt  be  a  mortgage 
because  of  the  clifficuhy  in  ascertaining  the  amount  of  the  debt, 
as  clearly  appears  by  the  definitions.  Of  course  there  is  less  cer- 
tainty and  more  inconvenience  in  reducing  an  obhgation  of  this 
nature  to  a  money  valuation  than  there  is  in  computing  the  amount 
due  on  an  ordinary  bond  or  note.  Nevertheless  it  may  be  approxi- 
mately done;  and  this  is  sufficient  for  all  the  purposes  of  substan- 
tial justice.  Courts  never  refuse  to  redress  an  injury  on  account 
of  the  difficulty  in  estimating  the  extent  of  the  injury  in  dollars 
and  cents. 

In  this  case  the  age,  health,  general  condition  and  expectation  of 
life  of  Sarah  A.  Bostwick  must  be  known;  add  to  these  the  probable 
cost  of  supporting  her  for  one  year,  and  we  have  the  data  for  a 
reasonable  estimate  of  the  cost  of  supporting  her  through  life. 
It  is  a  problem  of  the  same  nature,  containing  the  same  elements 
and  similar  factors,  with  the  problem  which  the  parties  solved 
fourteen  years  ago.  They  then,  as  it  seems,  fixed  the  outside 
limit  at  $900.  The  same  thing  can  be  done  now  as  well  as  then. 
Possibly  S900  may  be  considered  an  equitable  Hmit  beyond  which 
the  plaintiff  may  not  claim  in  this  case.  As  other  circumstances 
may  exist  which  will  materially  affect  the  general  question  we 
will  not  consider  the  question  further  on  this  demurrer. 

Regarding  the  conveyance  as  a  mortgage,  as  we  do,  there  is  no 
foundation  for  the  claim  that  an  entry  for  a  breach  of  the  condition 
is  essential.  An  entry  is  essential  when  the  grantor  would  divest 
the  grantee  of  his  title  for  a  breach  of  a  condition.  This  is  an  ac- 
tion by  the  grantee,  in  whom  the  title  is,  not  to  enforce  a  forfeit- 
ure, but  to  foreclose  an  equity  of  redemption,  unless  the  grantor^ 
within  a  reasonable  time  allowed  him  therefor,  pays  the  damage 
ustained  by  a  breach  of  his  agreement. 

The  Court  of  Common  Pleas  is  advised  to  overrule  the  demurrer.* 

^  In  Henley  v.  Hotaling,  41  Cal.  22  an  agreement,   either  express  or  im- 

'(1871),    Rhodes,    C.    J.,    said:    "A  jdied,  on  the  part  of  the  mortgagor,  or 

mortgage  is  a  security  for  the  per-  some  one  in  whose  behalf  he  executes 

formance    of    an    agreement,    which  the  mortgage,  to  pay  to  the  mortgagee  a 

is  usually  to  pay  a  sum  of  money.  sum  of  money.     If  there  is  no  debt 

Leaving   out   of   view   other   agree-  there  is  no  mortgage." 

mehts  than  those  for  the  payment  Cf.  Flagg  v.  Mann,  2  Sumn.  486 

ot  money,  it  is  essential  that  there  he  (1-837),  per  Story,  J. 


CHAPTER    III.    (Continued) 
Section  II. — Illegal  Obligations 


W- 
B- 


V.  B- 
v.W- 


The  Rolls  Court,  Chancery,  1863 
(32  Beav.  574) 

The  Master  of  the  Rolls  (Sir  John  Romilly).^ 

This  is  a  case  which  has  caused  me  considerable  pain ;  luit  I  can 
state  very  shortly  why  I  think  that  this  deed  cannot  be  supported. 

Tlj^re  are  two  suits,  one  to  enforce  a  deed  of  the  20th  of  August, 

1855,  by  which,  irTconsideration  of  1700/.  lent  by  the  defendant. 

.Mr.3v!to  Mr.  B.,  Mr.  B.  and  his  hvechildren  (two  only  of  whom_ 

wore  adult)  covehaht^LL-tQ-currcnrtorq^Qpyholds  for  securing  that^ 

amount.    The  second  suit  is  instituted  by  B.  and  his  two  daughters 

set  that  aeeci  aside! 


The  case  is  a  very  painful  one  in  this  respect:  It  appears_thaL 
ATr.  W.  seduced  C.,  one  of  Mr.  B's  daughtm-s;,  nnd  thnt  in  .Tnnp 


1855,  Mr^T.,  a  brother-in-law  of  Mr.  B.,  had  pointed  out  to  him 
^_j_^  otfontirM^g  pQiVi  tr.  h^  ^jpnghtcr  bv  Mr.  W  -■  thiit  jJ-war  a  matter 
of  notoriety  in  the  town  i^^  wh]Vh  t.hpy  i-psuWT  and  that  it  was 
essential  to  put  a  stop  to  it.  At  the  sametimeTMr.  T.  (roIcThiiiL 
hp  should  require  the  monev  due  to  him  to  be  repaid,  whkk. 


sisted  of  llOQL,  ancLtw^  ^li"^^  ^^  -•^no/^_each  for  which  he  \\^as_sur£t,v. 
When  T.  required  t^^  "^ODpy  to  be  repaid,  Mr^Jj^aimlkiLto  ^^r. 
W.  for  an  advance.    A  day  or  two  after,  in  June.  185_5^n  conse- 

of  Mrs.  T.,  who 


quence  of  thesTT'ong  remonstrancp^  t^\  Mr  TL  

^\v^l!^-tlle  aunt  ot  this  young  lady,  Mr.  B.  wrote  a  jetter_to  Mr.  W., 

"in  which  he  told  liim.  tnat  in  consequence  of  thejiepflJ't,  he  must 

^discontinue  his  visits  to  his  house.     In  ans\ver  to  this.  Mr.  W. 

wrote  that  there  waf^  "^  ^r^^b  i"  ^^f"  suggestion,  but  that  he  ac- 


quiesced in  the  propriety  of  the  refusal  to  allow^jioiitjjiiiajict^r 
1  The  statement  of  facts  and  a  portion  of  the  opinion  are  omitted. 

213 


214  THE    OBLIGATION    SECURED 

his  visits.  On  the  following  day  after  writing  this  letter,  Mr.  W. 
wrote  to  Mr.  B.  and  told  him  that  he  would  advance  the  money 
required  by  Mr.  B.,  and  a  treaty  took  place,  and  it  was  arranged 
that  the  advance  should  be  made,  and  it  was  effected  on  the  20th 
of  August,  1855,  about  two  months  after. 

It  is  impossible  to  read  the  letters  and  the  evidence  in  this  case, 
and  not  come  to  the  conclusion,  that  a  part  of  the  considera- 
tion for  the  advance  of  the  money  by  Mr.  W.  and  for  the  security 
which  was  given,  was  a  promise  that  W.  should  be  at  hberty  to  con- 
tinue his  visits  to  the  daughter.  It  is  impossible  that  the  father 
should  not  have  been  aware,  after  all  the  representations  made  to 
him  by  Mr.  T.  and  by  the  public  talk,  that  Mr.  W.  had,  at  that 
time,  actually  succeeded  in  seducing,  or  that  he  was  attempting  to 
seduce,  his  daughter.  It  is  impossible  to  doubt  the  fact  that  the 
money  was  given  in  order  that  Mr.  W.  should  be  allowed  to  con- 
tinue his  attentions  to  the  daughter,  whether  successful  or  not. 

I  am  of  opinion,  in  that  state  of  the  evidence,  that  no  person 
can  come  into  a  Court  of  Equity  and  ask  that  effect  should  be 
given  to  a  deed,  the  consideration  for  which  was  of  that  character. 
The  Court  is  compelled  to  look  at  the  whole  of  the  consideration, 
and  cannot  execute  the  deed  in  part.  And  I  am  of  opinion  that 
no  person  can,  on  such  evidence  and  facts  as  are  here  established, 
require  this  Court  to  give  any  assistance  to  either  party  concerned 
in  such  a  transaction. 

It  occurred  to  me  that  I  could  leave  the  matter  there,  but,  ob- 
serving that  others  besides  the  parties  to  the  corrupt  bargain  are 
affected  by  this  deed,  I  am  of  opinion  that  I  ought  not.  I  am  also 
influenced  by  this  consideration,  that,  upon  an  action  on  the  deed, 
the  same  defense  would  be  open  at  law,  and  I  think  that  I  should 
not  act  properly,  if  I  did  not,  as  far  as  I  am  able,  put  an  end  to 
this  painful  case.  Without  saying  anything  as  to  what  might  be 
done  in  an  action  at  law  to  recover  the  money  lent,  I  shall  order 
the  deed  to  be  delivered  up  to  be  cancelled. 

The  grounds  on  which  I  decide  this  case  make  it  unnecessary 
for  me  to  enter  into  the  consideration  whether  proper  protection 
was  afforded  to  the  two  young  ladies  in  this  matter;  but  it  would 
be  difficult  to  see  how  either  of  these  deeds  of  1853  and  1855  could 
be  supported  in  this  Court  as  against  them.* 

»  C/.  Whdey  v.  Norton,  1  Verii.  483      (1687) ;  Rider  v.  Kidder,  10  Ves.  360, 

366(1805). 


BOSANQUETT   V.    DASHWOOD  215 

BOSANQUETT  v.   DASHWOOD 

Court  of  Chancery,  1735 

(Cas.  temp.  Talb.  38) 

The  plaintiffs  being  Assignees  under  a  Commission_of_B^^k- 
ruptcY  against,  the  two  Cottons,  broughtJJheiL^nLagaiiiiit-Da^»b- 
wnofj  the  DefpnWflnt,  as  F.xenitor  of  Sir  Samuel  Dashwood,  who 
had  in  his  T  ifMi"^"  lent  «^-^»^-^i  j-^nm^  to  the  Cottons,  the  Bank- 


rupts,  i^pnr^  ^nnds  bearing  6/.  per  Cent.  Interest;  and  had  taken_ 
Advantage  of  their  necessitous  Circumstances,  and  compelled  them 
to  pay  at  the  Rate  of  lOl.  per  Cent,  to  which  thev  submitted,  and 
enter'd  into  other  Agreements  for  that  Purpose;  and  so  continued 
^aymg  l(U.jnaUJ.^vf,  t>nm  thgYpnr  i:iia,4xithe  Year  1724. 

'Twas  decreed  at  the  Rolls  that  the  Defendant  should  account; 
and  that  for  what  had  been  really  lent  legal  Interest  should  be  com- 
puted and  allowed;  and  what  had  been  paid  over  and  above  legal 
Interest  should  be  deducted  out  of  the  Principal  at  the  Time 
paid;  and  the  Plaintiffs  to  pay  what  should  be  due  on  the  Account: 
And  if  the  Testator  had  received  more  than  was  due  with  legal  In- 
terest, that  was  to  be  refunded  by  the  Defendant,  and  the  Bonds  to 
be  delivered  up, 

Mr.  Solicitor  General  and  Mr.  Fazakerley  insisted  for  the  De- 
fendant, That  'twas  hard  to  inquire  into  a  Transaction  of  so  long 
standing,  the  Parties  having  on  all  sides  submitted  to  the  Agree- 
ment, and  that  Volenti  non  fit  Injuria;  which  was  the  Reason  of 
the  Lord  Holt's  opinion  in  the  Case  of  Tomkins  versus  Barnet,  1 
Salk.  22.  why  an  action  would  not  lie  for  Recovery  of  ]\Ioney  paid 
upon  an  usurious  Contract;  and  that  the  Bankrupts  being  Par- 
ticipes  Criminis,  should  have  no  more  Advantage  here  than  at  Law. 
Nothing  was  more  common  than  to  admit  the  Party,  after  he  had 
paid  the  Money,  to  be  an  Evidence  in  an  Information  upon  the 
Statute  of  Usury;  which  shews  he  is,  in  the  Eye  of  the  Law,  after 
Payment,  an  indifferent  Person;  And  compared  it  to  the  Case  of 
Gaming;  where,  if  the  Loser  pays  the  IVIoney,  and  does  not  sue  for 
the  Recovery  within  the  Time  prescribed  by  the  Act,  he  is  barred 
And  cited  the  case  of  Walker  versus  Pennj,  2  Vern.  78,  145. 

Lord  Chancellor  [Talbot].  There  is  no  Doubt  of  the  Bonds 
and  Contracts  therein  being  good :  But  it  is  the  subsequent  Agree- 
ment upon  which  the  Question  arises.     It  is  clear  that  more  has 


216 


THE    OBLIGATION    SECURED 


hppn  p-Au]  t-hnri  lepal  Interest.  That  appears  from  the  several 
Letters  which  have  been  read,  which  prove  an  Agreement  to  pay 
lOL  ver  Cent,  and  from  Sir  Samuel  Dashwood's  Receipts-  but 


thp  Plaintiffs  hp  intjtled  to  any  Relief  in  Equit}:^ 


AToney  being  paid._and  tho^  Payments  agreed  to  be  continued,  by 
spveral  Letters  from  the  C^tons  to  Sir'SamueH^ashwooclwherein 
^are  Prom^^f^s  uTpav  off  the  Rpsidne^^s  now  thjlQufist.ion? 

The  only  Case  that  has  been  citedTthat  seems  to  come  up  to  this, 
is  that  of  Tomkins  versus  Barnet;  which  proves  only,  that  where  the 
Party  has  paid  a  Sum  upon  an  illegal  Contract,  he  shall  not  recover 
it  on  an  Action  brought  by  him.  And  tho'  a  Court  of  Equity 
will  not  differ  from  the  Courts  of  Law  in  the  Exposition  of  Stat- 
utes; yet  does  it  often  vary  in  the  Remedies  given,  and  in  the  Man- 
ner of  applying  them. 

The  Penalties,  for  Instance,  given  by  this  Act,  are  not  to  be  sued 
for  here;  nor  could  this  Court  decree  them.  And  though  no  //;- 
debitatus  assumpsit  will  lie,  in  Strictness  of  Law,  for  receiving  of 
Money  paid  upon  an  usurious  Contract;  yet  that  is  no  Rule  to  this 
Court,  which  will  never  see  a  Creditor  running  away  with  an  exor- 
bitant Interest  beyond  what  the  Law  allows,  though  the  Money  has 
been  paid,  without  relieving  the  Party  injured.  The  Case  of  Sir 
Thomas  Meers,  heard  by  the  Lord  Harcourt,  is  an  Authority  in 
Point,  that  this  Court  will  relieve  in  Cases  which  (though  perhaps 
strictly  legal)  bear  hard  upon  one  Party.  The  case  was  this:  Sir 
Thomas  Meers  had  in  some  Mortgages  inserted  a  Covenant,  That  if 
the  Interest  was  not  paid  punctually  at  the  Day,  it  should  from 
that  Time,  and  so  from  Time  to  Time,  be  turned  into  Principal,  and 
bear  Interest:  Upon  a  Bill  filed,  the  Lord  Chancellor  relieved  the 
Mortgagors  against  this  Covenant,  as  unjust  and  oppressive.  So 
likewise  is  the  Case  of  Broadway,  which  was  first  heard  at  the  Rolls, 
and  then  affirm'd  by  the  Lord  King,  an  express  Authority,  that  in 
Matters  within  the  Jurisdiction  of  this  Court  it  will  relieve,  though 
nothing  appears  which,  strictly  speaking,  may  be  called  illegal. 
The  Reason  is;  because  all  those  Cases  carry  somewhat  of  Fraud 
with  them.  I  do  not  mean  such  a  Fraud  as  is  properly  Deceit;  but 
such  Proceedings  as  lay  a  particular  Burden  or  Hardship  upon  any 
Man:  It  being  the  Business  of  this  Court  to  relieve  against  all  Of- 
fences against  the  Law  of  Nature  and  Reason :  And  if  it  be  so  in 
Cases  which,  strictly  speaking,  may  be  called  legal,  how  much  more 
shall  it  be  so,  where  the  Covenant  or  Agreement  is  against  an  ex- 
press Law  (as  in  this  Case)  against  the  Statute  of  Usury,  though 
the  Party  may  have  submitted  for  a  Time 4^0  the  Terms  imposed  on 


BOSANQUETT    V.    DASH  WOOD  217 

him?  The  Payment  of  the  Money  will  not  alter  the  Case  in  a  Court 
of  Equity;  foi-,  it  ought  not  to  have  been  paid:  And  the  Maxim  of 
Volenti  non  fit  Injuria  will  hold  as  well  in  all  Cases  of  hard  Bar- 
gains, against  which  the  Court  relieves,  as  in  this.  It  is  only  the 
Corruption  of  the  Person  making  such  Bargains  that  is  to  be  con- 
^idered:  It  is  that  only  which  the  Statute  has  in  View:  and  'tis  that 
only  which  intitles  the  Party  oppressed  to  Relief.  This  answers  the 
Objection  that  was  made  by  the  Defendant's  Counsel,  of  the  Bank- 
rupts being  Participes  Criminis;  for,  they  are  oppressed,  and  their 
Necessities  ol)liged  them  to  submit  to  those  Terms.  Nor  can  it  be 
said  in  any  Case  of  Oppression,  that  the  Party  oppressed  is  Par- 
ticeps  Criminis;  since  it  is  that  very  Hardship  which  he  labours 
under,  and  which  is  imposed  on  him  by  another,  that  makes  the 
Crime.  The  case  of  Gamesters,  to  which  this  has  been  compared,  is 
no  way  parallel;  for,  there  both  Parties  are  Criminal:  And  if  two 
Persons  will  sit  down,  and  endeavour  to  ruin  one  another,  and  one 
pays  the  Money,  if  after  Payment  he  cannot  recover  it  at  Law,  I  do 
not  see  that  a  Court  of  Equity  has  anything  to  do  but  to  stand 
Neuter;  there  being  in  that  Case  no  Oppression  upon  one  Party,  as 
there  is  in  this.^  Another  Difficulty  was  made  as  to  the  Refunding: 
But  is  not  that  a  common  Direction  in  all  Cases  where  Securities 
are  sought  to  be  redeemed,  that  if  the  Party  has  been  over-paid,  he 
shall  refund?  Must  he  keep  Money  that  he  has  no  Right  to,  merely 
because  he  got  it  into  his  Hands?  I  do  not  determine  how  it  would 
be  if  all  the  Securities  were  delivered  up;  that  is  not  now  before 
me:  I  only  determine  what  is  now  before  the  Court;  and  is  the  com- 
mon Direction  in  all  Cases  whwe  Securities  are  sought  to  be  re- 
deemed. 

And  so  affirmed  the  Decree,  &c. 

i"In  cases  where  agreements  or  the    public    interest    requires    that 

other  transactions  are  repudiated  on  relief  should  be  given,  and  it  is  given 

account  of  their  being  against  public  to    the    public    through    the    party 

policy,    the    circumstance    that    the  (Story,  Eq.,   §208)." — Per  English 

relief  is  asked  by  a  party  who  is,  Ch.   J.,    in   Breathwit   v.   Rogers,   32 

perhaps,  particeps  criminis  is  not  in  Ark.  758  (1878). 
equity  material.    The  reason  is  that 


218  THE    OBLIGATION    SECURED 

FANNING   V.   DUNHAM 

Court  of  Chancery  of  New  York,  1821 

(5  Johns.  Ch.  122) 

Bill  in  equity.  Plaintiff  sought  cancellation  of  a  mortgage  and 
also  an  injunction  against  the  defendant  from  proceeding  at  law 
on  the  mortgage  or  selling  under  it.  It  appeared  that  defendant 
was  about  to  foreclose  the  mortgage  by  virtue  of  a  power  of  sale 
contained  therein.  Plaintiff  claimed  that  the  notes  and  mortgage 
were  made  and  delivered  upon  usurious  consideration.  On  this 
point  a  feigned  issue  was  tried  and  the  jury  found  in  favor  of  plain- 
tiff.i 

The  Chancellor  [Kent].  If  the  defendant  was  endeavoring 
to  enforce  any  of  his  securities  in  this  Court,  and  the  present  plain- 
tiff had  set  up  and  made  out  the  usury,  by  way  of  defense,  the 
remedy  would  have  been  obvious.  The  securities  would  have  been 
declared  void,  and  ordered  to  be  delivered  lip  and  cancelled.  But 
the  defendant  has  not  resorted  to  this  Court.  He  has  caused  a 
judgment  to  be  entered  up  at  law,  upon  the  warrant  of  attorney 
given  by  the  plaintiff;  and  the  Supreme  Court  have  ultimately 
refused  to  afford  any  relief  to  the  plaintiff  against  that  judgment, 
though  that  Court  awarded  a  feigned  issue,  and  had  the  usury  in 
the  bond  upon  which  the  judgment  was  entered,  established  by 
the  verdict  of  a  jury.  The  defendant  has  also  proceeded  to  fore- 
close the  mortgage,  not  by  the  aid  of  this  Court,  but  by  advertising 
under  a  power  contained  in  the  mortgage,  and  it  is  the  present 
plaintiff  who  is  compelled  to  come  here  and  ask  for  relief,  which  he 
cannot  obtain  elsewhere,  against  the  judgment  at  law  and  other 
legal  securities  infected  with  usury,  by  means  of  the  original  trans- 
actions and  responsibilities  which  they  were  intended  to  cover. 

The  question  now  is,  upon  what  terms  he  can  have  relief? 

With  respect  to  the  relief  that  can  be  afforded  here,  I  take  the 
rule  to  be,  that  a  plaintiff  who  comes  to  a  Court  of  Equity  for  relief 
against  a  judgment  at  law,  or  other  legal  security,  on  the  ground 
of  usury,  cannot  be  relieved,  except  upon  the  reasonable  terms  of 
paying  to  the  defendant  what  is  really  and  bona  fide  due  to  him. 
On  the  other  hand,  if  the  party  claiming  under  such  usurious  judg- 
ment, or  other  securitj",  resorts  to  this  Court  to  render  his  claim 

'  Statement  of  facts  abridged.     Portion  of  opinion  omitted. 


FANNING   V.    DUNHAM  219 

available,  and  the  defendant  sets  up  and  establishes  the  charge  of 
usury,  the  Court  will  decide  according  to  the  letter  of  the  statute, 
and  deny  all  assistance,  and  set  aside  every  security  and  instru- 
ment whatsoever,  infected  with  usury.  It  is  perfectly  immaterial, 
in  respect  to  the  application  of  the  principle  to  the  case  of  the 
debtor  who  sues  here,  whether  the  usury  be  confessed  by  the  de- 
fendant in  his  answer,  or  be  made  out  by  proof.  The  plaintiff 
must  still  consent  to  do  what  is  just  and  equitable  on  his  part,  or , 
the  Court  will  not  assist  him,  but  leave  him  to  make  his  defense  at 
law  as  well  as  he  can. 

The  equity  cases  speak  one  uniform  language;  and  I  do  not  know 
of  a  case  in  which  relief  has  ever  been  afforded  to  a  plaintiff,  seek- 
ing relief  against  usury,  by  bill,  upon  any  other  terms.  It  is  the 
fundamental  doctrine  of  the  Court.  Lord  Hardwicke,  1  Vese}', 
320,  said  that  in  case  of  usury  equity  suffers  the  party  to  the 
illicit  contract  to  have  relief,  but  whoever  brings  a  bill,  in  case  of 
usury,  must  submit  to  pay  principal  and  interest  due.  Lord  Eldon. 
3  Ves.  &  Bea.  14,  after  an  interval  of  more  than  sixty  years,  de- 
clared precisely  the  same  rule.  At  law,  says  he,  you  must  make  out 
the  charge  of  usury,  and  at  equity  j^ou  cannot  come  for  relief  with- 
out offering  to  pay  what  is  really  due;  and  you  must  either  prove 
the  usury  by  legal  evidence,  or  have  the  confession  of  the  party. 
In  Eagleson  v.  Shotivell,  1  Johns.  Ch.  Rep.  536,  the  same  rule  was 
followed  in  this  Court,  where  a  party  came  to  be  relieved  against 
usury  in  a  mortgage. 

I  have  been  thus  particular  in  showing  the  rule  of  equity  on  this 
subject,  because  the  plaintiff  has  sought  bj^  his  bill  to  have  all  the 
securities  taken  by  the  defendant,  and  infected  with  usury,  de- 
clared void,  and  ordered  to  be  cancelled,  without  offering  to  pay 
anything.  His  counsel  have  also  contended,  at  the  hearing,  that 
the  rule  in  equity,  where  the  defendant  either  confesses  the  usury  or 
it  is  established  by  testimony,  is  the  same  as  it  is  when  usury  is 
set  up  as  a  defense  to  a  demand  in  law  or  equity.  All  that  I  can 
do  in  this  case,  consistently  with  my  view  of  the  established  doc- 
trine of  the  Court,  is  to  direct  an  account  to  be  taken  of  the  deal- 
ings between  the  parties,  and  to  hold  the  securities  which  the  de- 
fendant has  taken  to  be  good  only  for  the  balance  which  may 
appear  to  be  due  to  the  defendant,  after  deducting  all  usurious 
excess  in  any  of  his  commissions  and  charges.* 

1  This  represents  the  general  view  186  [1864]).  For  the  rule  applied  in 
{Heacock  v.  Swartwout,  28  111.  291  cases  where  the  mortgagor  is  de- 
[1862];  Sutphen  v.  Cushman,  35  III.      fendant,  see  Kuhner  v.  Butler,  11  la. 


220  THE    OBLIGATION    SECURED 

WILLIAMS   V.   FITZHUGH 
Court  of  Appeals  of  New  York,  1868 

(37  N.  Y.  444) 

The  plaintiff  sought  in  this  action  a  judgment  declaring  certain 
six  notes  (made  by  the  plaintiff  and  given  to  the  appellants'  testa- 
tor, two  dated  April  3,  1854,  for  $5000  each,  and  four  dated  Jul^'  6, 
and  July  1,  1854,  for  $5000,  $6000,  $6000,  $4000,  respectively), 
amounting  in  the  aggregate  to  $31,000,  and  a  mortgage  upon  land 
in  Ohio,  given  by  the  plaintiff  to  secure  the  payment  of  the  six 
notes,  void  for  usury,  and  adjudging  and  decreeing  that  they  be 
given  up,  cancelled  and  discharged,  and  forbidding  the  prosecution 
of  an  action  already  commenced  in  one  of  the  courts  of  Ohio, 
upon  two  of  those  notes,  or  any  other  action  upon  any  of  the  said 
notes,  or  the  said  mortgage.  The  original  defendant,  Allen  Ay- 
rault,  having  died  pending  the  action,  the  action  was  revived 
against  the  respondents,  his  executors. 

The  action  was  tried  at  Special  Term  in  the  Supreme  Court,  and 
to  sustain  the  action  the  plaintiff  produced  a  record  of  judgment 
which  set  forth  the  alleged  transactions,  in  which  the  notes  were 
given,  and  by  which  one  of  the  notes  dated  in  July  was  adjudged 
void  for  usury,  and  upon  the  evidence  contained  in  the  record  the 
judge,  at  Special  Term,  found  that  all  of  the  six  notes  were  so  void, 
and  a  judgment  was  rendered  declaring  the  notes  and  the  mortgage 
to  be  void  for  usury,  and  requiring  that  the  respondents  deliver 
up  the  notes  and  mortgage  to  the  plaintiff  to  be  cancelled,  and 
execute  a  discharge  of  the  mortgage  in  such  form  that  it  may  be 

419  (1860);  Union  Bank  v.  Bell,  14  The  holding  is  similar  in  cases 
Oh.  St.  200  (1863);  Snyder  v.  Oris-  where  the  bonus  is  secretlj-  taken 
wold,  37  111.  216  (186.5).  Compare  by  an  agent.  Thus,  where  the 
Himt  V.  Acre,  28  Ala.  (n.  s.)  580  lender  has  received  a  security  pro- 
(18.56).  viding  for  payment  of  the  precise 
Where,  in  an  action  to  foreclose  a  amount  loaned  by  him  with  hiwful 
mortgage  owned  by  a  trust  estate,  interest,  the  fact  that  his  agent  with- 
it  appears  that  one  of  the  trustees  out  his  authority,  knowledge  or  par- 
received  a  usurious  bonus,  the  mort^  ticipation,  had  extorted  from  the 
gage  is  not  avoided  thereby,  unless  borrower  a  sum  of  money  upon  the 
it  be  shown  that  the  bonus  was  re-  false  pretense  that  it  was  a  bonus 
ceived  by  the  authority  or  with  the  for  his  principal,  does  not  taint  the 
knowledge  of  the  other  trustees.  security  with  usury.  Estevcz  v. 
Van  Wyck  v.  Wallrrs,  16  Hun,  209,  Purdy,  66  N.  Y.  446  (1876). 
affirmed  81  N.  Y.  352  (1878). 


WILLIAMS    V.    FITZHUGH  221 

recorded  in  Ohio,  so  that  it  may  be  discharged  of  record  and  cease 
to  be  a  lien  upon  the  real  estate  described  in  it,  and  further  enjoin- 
ing the  prosecution  of  an  action  (found  to  be  pending)  on  some  of 
the  notes  in  one  of  the  com'ts  of  Ohio,  and  awarding  to  the  plaintiff 
his  costs. 

On  appeal  to  the  General  Term,  the  Supreme  Court  modified  the 
judgment  so  as  to  except  from  the  operation  thereof  the  two  notes 
for  $5000  each,  dated  April  3,  1854,  on  the  ground  that  the  before- 
mentioned  record  did  not  necessarily  decide  that  those  two  notes 
were  usurious,  and  they  adjudged  that  in  all  other  respects  the  said 
judgment  be  affirmed.  The  executors  (defendants  below)  appealed 
to  this  court. 

Woodruff,  J.  The  principal  question  which  was  discussed  on 
this  appeal,  and  which  includes  nearly  all  of  the  subordinate  ques- 
tions raised,  is,  will  the  courts  of  this  State  entertain  a  bill  to  de- 
clare void  and  compel  the  cancellation  of  a  mortgage  of  lands  lying 
in  another  State  and  executed  there  in  pursuance  of  a  contract  en- 
tered into  in  this  State  to  secure  loans  made  and  payable  in  this 
State,  some  of  which  loans  are  usurious  and  void  by  our  laws? 

This  question  may  be  intelligibly  discussed  by  inquiring — first, 
would  such  a  bill  be  entertained  under  the  same  circumstances  if 
the  lands  were  situated  in  this  State?  second,  how  is  the  question 
affected  by  the  location  of  the  lands  without  our  jurisdiction?  and. 
third,  should  the  court  require  the  surrender  and  discharge  of 
such  a  mortgage  without  the  pa>Tnent  of  the  loans  which  are  not 
found  to  be  usurious? 

First,  then,  suppose  the  lands  were  situated  in  this  State. 

1st.  It  cannot  be  denied,  indeed  I  do  not  understand  the  counsel 
for  the  appellant  to  question,  that  such  a  mortgage  is  void  by  the 
law  of  the  State  of  New  York.  Our  statute  declares  that  "all 
.  .  .  assurances,  conveyances,  all  other  contracts  or  securities 
.  whereby  there  shall  be  reserved,  or  taken,  or  secured,  or 
agreed  to  be  reserved  or  taken,"  any  greater  sum  or  value  for  the 
loan  or  forbearance  of  money,  than  at  the  rate  of  seven  per  cent, 
per  annum,  "shall  be  void."  The  proposition  is,  that  a  security 
given  to  secm-e  the  payment  of  money  is  void  if  it  be  given  to  se- 
cure a  usurious  loan,  and  if  it  be  so  given,  the  fact  that  it  was  also 
given  to  secure  loans  which  were  not  usurious,  will  not  preserve 
it  from  entire  condemnation.    If  void  in  part,  it  is  void  altogether. 

The  late  learned  Chief  Justice  Jones,  in  The  Fulton  Bank  v.  Ben- 
edict (1  Hall  S.  C.  480,  546),  thus  states  the  proposition:  "It  is 
well  settled  that  if  any  part  of  the  loan  or  debt  for  which  the  note 


222  THE    OBLIGATION    SECURED 

or  security  was  given  is  usurious,  the  security  is  void;"  referring, 
among  other  cases,  to  Harrison  v.  Hormel,  5  Taunt.  780. 

In  Jackson  v.  Packard,  6  Wend.  415,  it  is  held  that  a  mortgage, 
given  to  secure  a  sum  of  money,  consisting  of  one  loan  made 
prior  thereto,  which  is  usurious,  and  another  which  is  free  from 
usury,  is  void.  "If  a  mortgage  or  other  security  is  given  for  two 
or  more  antecedent  loans,  either  of  which  was  infected  with  usury, 
the  whole  security  is  void."  That  under  the  statute  "there  is  no 
such  thing  as  such  an  instrument  being  void  in  part  and  good  for 
the  residue;  the  taint  of  usury  destroys  the  whole  security." 
The  debt  which  was  free  from  usury  may  be  recovered,  but  the 
mortgage  is  void  (Rice  v.  Welling,  5  Wend.  595).  And  in  Hoyn- 
mond  V.  Hopping,  13  Wend.  505,  the  same  doctrine  is  re-asserted 
in  reference  to  contracts  generally.  "The  statute  against  usurj' 
renders  any  contract  infected  with  it,  utterly  void;  but  if  the  usu- 
rious security  was  given  in  part  for  a  pre-existing  valid  debt,  that 
debt  is  not  destroyed  by  the  illegal  security."  These  decisions  have 
stood  as  the  law  of  this  State  for  more  than  thirty  years,  and  I  am 
not  aware  that  their  correctness  has  been  questioned  in  any  of  our 
courts. 

2d.  If,  then,  the  mortgaged  premises  were  in  this  State,  have 
our  courts  jurisdiction  to  decree  that  the  mortgage  be  given  up  and 
cancelled,  and  is  it  error,  upon  the  facts  assumed,  to  do  so?  The 
statute  is: 

"§  13.  Whenever  any  borrower  of  money  .  .  .  shall  file  a  bill 
in  chancery  for  relief  or  discovery  against  any  violation  of  the 
provisions  of  .  .  .  this  act,  it  shall  not  be  necessary  for  him  to 
pay,  or  offer  to  pay,  any  interest  or  principal  on  the  sum  or  thing 
loaned,  nor  shall  any  court  of  chancery  require  or  compel  the  pay- 
ment ...  of  the  principal  sum,  or  interest  or  any  part 
thereof,  as  a  condition  of  granting  relief. 

"§  14.  Whenever  it  shall  satisfactorily  appear,  by  the  admission 
of  the  defendant,  or  by  proof,  that  any  .  .  .  assurance,  pledge, 
conveyance,  contract,  security  .  .  .  has  been  taken  or  re- 
ceived in  violation  of  the  provisions  of  this  act,  the  Court  of  Chan- 
cery shall  declare  the  same  to  he  void,  and  enjoin  any  prosecution 
thereon,  and  order  the  same  to  he  surrendered  and  cancelled^ 

This  language,  taken  literally,  seemed,  not  only  to  confer  juris- 
diction, but  absolutely  to  require  the  Court  of  Chancery  to  decree 
the  surrender  and  cancellation  of  securities  infected  with  usury,  of 
whatever  description,  whenever  the  borrower  saw  fit  to  invoke  the 
interposition  of  the  court,  without  the  aid  of  any  other  ground  for 


WILLIAMS    V.    FITZHUGH  223 

coming  into  that  tribunal  than  the  fact  of  usury.  But  the  chan- 
cellor, in  Perrine  v.  Striker,  7  Paige,  598,  held,  that  where  the 
party  had  a  full  and  complete  remedy  at  law,  he  could  not  come 
into  the  Court  of  Chancery  for  relief;  that  this  statute  was  not  in- 
tended "to  compel  the  Court  of  Chancery  to  take  jurisdiction  of 
every  question  of  usury,  although  a  perfect  remedy,  both  as  to  dis- 
covery and  relief,  could  be  had  in  a  court  of  law."  Hence,  when  the 
parties  to  a  note  not  negotiable  sought  a  discover}^  and  perpetual 
injunction  against  a  suit  thereon  (although  the  statute  authorized 
the  examination  of  the  plaintiff  in  the  suit  at  law  on  the  trial) 
on  the  ground  that  it  was  usurious,  the  bill  was  dismissed  because 
the  remedy  was  complete  at  law.  But  here  cognized  the  jurisdic- 
tion and  the  propriety  of  its  exercise,  when  there  were  any  special 
circumstances  which  made  the  remedy  at  law  ineffectual  or  incom- 
plete. 

In  Morse  v.  Hovey,  9  Paige,  197,  on  dismissing  the  bill,  the  chan- 
cellor affirms  the  decision  in  Perrine  v.  Striker,  and  expounds  it 
more  fully,  thus:  "The  legislature  did  not  intend  to  transfer  to 
this  court  concurrent  jurisdiction  with  courts  of  law  in  every  case 
of  a  usurious  contract;  but  merely  to  give  to  this  court  the  power 
to  exercise  its  jurisdiction  in  those  cases  where  it  was  necessary  to 
aid  the  defense  of  usury;  or  to  remove  usurious  securities  which 
were  a  cloud  upon  the  complainant's  title  to  real  property,  or  which 
might  be  used  at  law  to  his  injury  in  such  a  manner  that  he  could 
not  interpose  a  legal  defense  to  a  suit  on  them  in  a  court  of  law. 
Here  the  note  is  negotiable,  so  that  it  may  be  sued  in  the  name  of  a 
third  person;  and  if  the  bill  had  contained  the  allegation  that  the 
usury  could  only  be  proved  by  the  oath  of  the  defendant,  it  might 
possibly  have  presented  a  case  for  the  interference  of  this  court." 

Conceding  that  this  relaxation  of  the  stringent  and  imperative 
language  of  the  statute  is  reasonable,  no  construction  of  the  statute 
has  gone  further. 

Accordingly,  bills  bj'^  borrowers  to  remove  usurious  securities, 
■which  are  a  cloud  upon  the  complainant's  title  to  real  property, 
have  uniformly  been  entertained.  (See  Cole  v.  Savage,  10  Paige, 
583,  questioned,  without  impeaching  the  general  doctrine,  in  Post 
V.  Bank  of  Utica,  7  Hill,  391;  Peters  v.  Mortimer,  4  Edw.  Ch.  279; 
Pearsall  v.  Kingsland,  3  id.  195;  Dry-Dock  Company  v.  American 
Life  Insurance  and  Trust  Company,  3  Comst.  361:  Schermerhorn 
V.  Talman,  14  N.  Y.  93;  Manice  v.  Dry-Dock  Company,  3  Edw. 
143.) 

It  is  no  answer  to  such  a  bill  that  the  mortgagor  has  a  good  CLif 


224  THE    OBLIGATION    SECURED 

fense  to  a  bill  for  the  foreclosure  of  the  mortgage.  It  is  an  appar- 
ent incumbrance  on  the  land,  Its  invalidity  depends  upon  ex- 
trinsic facts.  The  doctrine  of  Cox  v.  Clijt,  2  N.  Y.  123,  cited  by  the 
appellant,  that  the  complainant  has  a  perfect  legal  defense  against 
it  (when  a  right  under  it  is  asserted),  ''written  down  in  the  title- 
deed,"  has  no  application  to  it;  and  Ward  v.  Dewey,  16  N.  Y.  519, 
was  decided  on  like  grounds.  The  mortgage  is  an  impediment  to  a 
sale  of  the  land  for  its  value.  The  mortgagor  is  not  bound  to  wait 
until  the  mortgagee  attempts  a  foreclosure,  not  only  for  these 
reasons,  but  because  in  the  meantime  it  may  become  impossible  to 
prove  his  defense.  If  this  be  so,  then,  if  the  lands  mortgaged  were 
situated  in  this  State,  the  mortgage  in  question  was  wholly  void, 
and  there  is  sufficient  ground  for  invoking  the  interposition  of  the 
court  to  decree  that  such  a  mortgage  be  surrendered  and  cancelled 
or  discharged.  Whether  it  should  be  so  discharged  without  the  pay- 
ment of  that  portion  of  the  debt  which  has  not  been  adjudged  to  be 
usurious,  and  which,  for  the  purposes  of  this  appeal,  is  to  be  deemed 
both  legally  and  equitably  due,  will  be  presently  considered. 

Second,  how,  then,  is  the  question  affected  by  the  circumstance 
that  the  mortgaged  premises  are  situated  in  the  State  of  Ohio, 
where  the  mortgage  was  executed? 

The  mere  circumstance  that  the  land  is  in  another  State  can, 
upon  no  principle  that  I  can  discover,  furnish  a  reason  for  denying 
the  jurisdiction  of  our  courts,  or  for  questioning  the  propriety  of  its 
exercise.^  ... 

Third,  does  it  follow  that  the  decree  in  this  action,  so  far  as  it 
directed  the  surrender  and  discharge  of  the  mortgage,  was  war- 
ranted by  well-estabHshed  rules  of  equity  applicable  to  the  sub- 
ject? 

It  is  familiar  doctrine  in  courts  of  equity  that  "he  who  seeks 
equity  must  do  equity,"  and  without  that  the  court  of  equity  will 
not  extend  its  arm  for  the  relief  of  the  suitor.  If  he  can  protect 
himself,  either  in  whole  or  in  part  at  law,  if  he  can  defend  when 
assailed,  very  well;  he  can  decline  any  concession  of  the  equitable 
rights  of  the  adverse  claimant  and  stand  upon  his  legal  position,  it 
may  be  safe,  or  it  may  be  in  peril,  but  if  he  invoke  equitable  inter- 
position he  must  come  with  clean  hands  and  prepared  to  do  what- 
ever in  the  judgment  of  equity  is  fair  and  equitable  to  his  adver- 
sary; else,  the  court  will  not  entertain  him,  but  will  answer,  "Stand 
upon  your  legal  rights,  or  come  here  and  perform  the  just  condition 
of  equitable  relief." 

1  The  discussion  of  this  point  is  omitted. 


WILLIAMS    V.    FITZHUGH  225 

It  cannot  be  doubted,  therefore,  that  when  a  party  comes  into  a 
court  of  equity  to  remove  a  cloud  upon  the  title  to  his  land,  he  must 
do  whatever  it  is  equitable  that  he  should  do,  before  the  court  will 
interfere.  In  that  respect  he  stands  in  no  other  or  better  condition 
than  he  who  comes  to  compel  the  specific  performance  of  a  con- 
tract to  convey:  he  must  come  prepared  to  pay  and  perform  all  that 
by  the  conditions  of  the  contract  he  was  bound  to  pay  or  perform, — 
— or  than  he  who  comes  to  set  aside  a  conveyance  obtained  from 
him  by  fraud:  he  must  come  prepared  to  restore  all  that  he  has 
received  as  the  consideration  of  such  conveyance. 

And,  on  precisely  the  same  ground,  it  was  the  well-settled  rule  of 
courts  of  equity  that  he  who  came  into  that  court  to  set  aside  a 
conveyance  or  other  security  as  void,  because  given  to  secure  a 
usurious  loan,  nmst  come  prepared  to  pay  so  much  as  he  had  in 
fact  received.  He  might  stand  on  his  legal  rights  and  defend  any 
and  every  endeavor  to  compel  him  to  pay,  but  if  he  invoked  the  aid 
of  a  court  of  equity  to  give  him  affirmative  relief  that  court  recog- 
nized his  equitable  obligation  to  refund  what  he  had  received 
(Roge7\^  V.  Rathhim,  1  Johns.  Ch.  367;  Tupper  v.  Powell,  id.  439; 
Fanning  v.  Dunham,  5  id.  122,  137;  Morgan  v.  Schermerhorn,  1 
Paige,  544;  Fulton  Bank  v.  Beach,  id.  429;  s.  c,  3  Wend.  573; 
Taylor  et  ux.  v.  Bell  et  al,  2  Vern.  170;  Whitman  v.  Francis,  8 
Price,  616). 

On  what  ground  is  the  plaintiff  in  this  case  entitled  to  have  his 
mortgage  set  aside  without  qualification  or  condition? 

The  notes  which  he  had  given  to  secure  a  usurious  debt  are 
declared  void,  and  ordered  given  up  to  be  cancelled.  He  cannot  be 
prosecuted  upon  his  mortgage  in  any  form  in  this  State,  because 
by  law  it  is  void.  If  he  has  need  of  further  equitable  interference, 
it  is  because  the  mortgage  is  an  apparent  Hen,  a  cloud  upon  the 
title  to  his  lands,  and  he  should  be  relieved  therefrom. 

AVhy,  then,  if  he  asks  further  equitable  relief,  and  invokes  the 
further  interposition  of  a  court  of  equity  therefor,  should  he  not  do 
equity?  Why  should  he  not  pay  to  the  defendants  what  he  in  fact 
received? 

The  answer,  and  the  only  answer  which  is  or  can  be  suggested, 
is  that  our  statute  declares  (Laws  of  1837,  c.  430,  §  4),  that  when- 
fiver  any  borrower  of  money,  goods  or  things  in  action,  shall  file 
a  bill  in  chancery  for  relief  or  discovery,  or  both,  against  any 
violation  of  the  provisions  of  the  title  of  the  Statutes,  concerning 
the  interest  of  money,  "or  of  this  act,  it  shall  not  be  necessary  for 
him  to  pay,  or  offer  to  pay,  any  interest  or  principal  on  the  sum  or 


223  THE    OBLIGATION    SECURED 

thing  loaned,  nor  shall  any  court  of  chancery  require  or  compel  the 
payment  or  deposit  of  the  principal  sum  or  interest,  or  any  portion 
thereof,  as  a  condition  of  granting  relief,  or  compelling  or  discover- 
ing to  the  borrower,  in  any  case,  usurious  loayis  forbidden  by  the 
said  title  or  this  act."  This  section  of  the  act  of  1837  was  passed  to 
extend  the  previous  title,  so  that  it  should  embrace  cases  in  which 
the  court  was  applied  to  for  discovery,  as  well  as  cases  in  which 
relief  alone  was  sought,  and  to  relieve  him  from  pa3dng  any  part 
of  the  principal  or  interest  in  either  case,  and  it  should  therefore 
be  read  and  construed  in  connection  with  such  previous  law,  which 
is  as  follows  (1  Rev.  Stat.,  p.  772,  §  8):  "Whenever  any  borrower 
of  any  money,  goods  or  things  in  action,  shall  file  a  bill  in  chancery 
for  a  discovery  of  the  money,  goods  or  things  in  action  taken  or  re- 
ceived in  violation  of  either  of  the  foregoing  provisions,  it  shall  not 
be  necessary  for  him  to  pay,  or  offer  to  pay,  any  interest  whatever 
on  the  sum  or  thing  loaned,  nor  shall  any  court  of  equity  require 
or  compel  the  payment  or  deposit  of  the  principal  or  any  part 
thereof,  as  a  condition  of  granting  relief  to  the  borrower  in  any  case 
of  a  usurious  loan,  forbidden  by  this  chapter."  (See  Livingston 
V.  Harris,  3  Paige,  528;  same  case  on  appeal,  11  Wend.  324;  see 
the  history  of  this  legislation  in  Post  v.  Bank  of  Utica,  2  Comst. 
391  et  seq.)  ^ 

What  in  these  statutes  is  the  principal  sum  or  interest  which 
the  borrower  shall  not  be  required  to  pay?  Is  it  not  the  "usurious 
loan"  and  the  interest  thereon?  Is  it  not  the  money,  goods  or 
things  in  action,  taken  or  received  in  violation  of  the  provisions  of 
the  act?  Most  clearly  that,  and  only  that.  It  does  not  contem- 
plate, it  is  true,  the  existence  of  any  other  equitable  condition, 
but  it  by  no  means  requires  that  any  other  condition  should  be 
waived. 

The  subject  dealt  with  is  a  loan  upon  usury;  it  designs  that 
there  shall  be  no  means,  direct  or  indirect,  in  which  the  payment 
of  such  a  loan,  or  any  interest  thereon,  shall  be  compelled  either  by 

^  X  executed  and  delivered  a  mort-  since  Z  is  not  a  "borrower"  within 
gage  to  Y  in  the  sum  of  $10,000  which  the  meaning  of  the  provisions  of  the 
was  usurious  in  that  X  received  from  Usury  Law  of  1837,  declaring  such 
Y  but  $8,000.  After  paying  the  payment  or  offer  to  be  unnecessary 
interest  on  the  mortgage  for  some  as  a  condition  of  granting  relief  to 
years,  X  died,  leaving  a  will  whereby  a  "borrower."  Buckingham  v.  Corn- 
he  devised  the  mortgaged  lands  to  Z.  ing,  91  N.  Y.  525  (1883). 
Held,  Z  cannot  rid  the  land  of  the  See,  also,  Leavitt  v.  Enos,  155  App^ 
mortgage  without  paying  or  offering  Div.  (N.  Y.)  584  (1913). 
to    pay    the    sum    actually    loaned, 


WILLIAMS    V.    FITZHUGH  227 

a  court  of  law  or  equity.  And  relief  against  such  payment  accom- 
plishes the  end,  so  far  as  this  statute  directs  relief  to  be  given. 

Hence  the  discovery  spoken  of,  and  authorized  by  the  statute, 
is  a  discovery  of  the  money,  etc.,  taken  or  received  in  violation  of 
the  statute,  and  not  money  which,  not  being  so  received,  the 
borrower  is  bound  both  at  law  and  equity  to  repay.  And  it  is  the 
principal  or  interest  on  the  sum  loaned,  i.  e.,  loaned  in  violation  of 
the  statute,  the  payment  of  which  cannot  be  required  as  a  condition 
of  relief. 

It  follows  that  where  a  contract  or  obligation  is  given  for  two 
or  more  separate  and  independent  things  or  objects,  having  no 
connection  with  each  other,  and  one  of  those  objects  is  the  security 
of  a  usurious  debt,  although  the  contract  or  obligation  is  altogether 
void  for  reasons  above  given,  and  no  action  at  law  or  elsewhere 
could  be  maintained  thereon,  nevertheless,  if  the  party  comes  into 
a  court  of  equity  to  ask  that  it  be  surrendered,  all  that  the  statutes 
of  usury  have  done  affecting  the  complainant's  right  to  rehef,  is  to 
forbid  that  any  payment  on  account  of  such  debt  shall  be  made  a 
condition  of  relief.  As  to  other  conditions,  the  statute  is  silent, 
and  the  court  is  left  to  administer  relief  upon  those  principles  which 
govern  the  subject  generally. 

When,  therefore,  the  plaintiff  asks  that  a  mortgage  be  cancelled 
as  a  cloud  upon  the  title  to  his  lands,  and  that  a  court  of  equity 
shall  so  direct,  in  virtue  of  its  power  and  its  disposition  to  enforce 
his  equitable  rights,  the  court  may  not  require  that  he  pay  a 
usurious  debt,  or  any  part  thereof,  or  any  interest  thereon,  but 
it  may  require  the  performance  of  any  other  duty  which  is  just  to 
the  adverse  party,  unembarrassed  by  the  statutes  in  question. 

In  equity,  the  mortgagor  in  such  case  stands,  in  reference  to 
debts  not  usurious  secured  by  the  mortgage,  in  the  same  attitude 
as  a  complainant  seeking  to  redeem.  He  must  pay  what  at  law  and 
in  equity  he  owes.  Nor  is  this  any  departure  from  the  doctrine 
already  stated,  that  the  mortgage,  being  void  in  part,  because  given 
to  secure  a  usurious  debt,  is  void  altogether. 

Upon  that  doctrine,  the  plaintiff,  if  he  see  fit,  may  rely,  and  on 
that  ground  he  may,  if  he  can,  defend  himself  and  the  title  to  his 
lands  whenever  and  wherever  assailed,  but  if  he  asks  affirmative 
action  and  interference  from  a  court  of  equity  to  set  aside  the  mort- 
gage and  adjudge  its  surrender,  he  must  do  equity  by  paying  his 
just  debt,  not  impeached  for  usury. 

The  most  that  the  court  below  should  have  done,  was  to  adjudge 
that  so  much  of  the  apparent  debt  as  was  secured  by  the  four  notes 


228  THE    OBLIGATION    SECURED 

dated  in  July,  1854,  proved  and  adjudged  (by  the  decree  as  mod- 
ified by  the  General  Term  of  the  Supreme  Court)  to  be  usurious, 
was  void;  that  the  said  notes  be  surrendered  to  be  cancelled,  and 
that  the  defendants  be  enjoined  against  the  prosecution  of  any 
suit  upon  those  four  notes. 

The  judgment  should  be  modified  to  conform  to  these  views 
without  costs  to  either  party  on  the  appeal,  and  the  judgment  ren- 
dered at  the  Special  Term,  so  far  as  it  adjudged  or  decreed  the  sur- 
render or  discharge  of  the  mortgage  should  be  reversed,  and  so  far 
as  it  awarded  costs  to  the  plaintiff,  should  be  further  reversed  and 
modified  so  that  neither  party  recover  costs  of  the  other  in  this 
action. 

All  the  judges  concurring. 

Judgment  affirmed,  vrith  modification} 


STILLMAN   V.   LOONEY 

Supreme  Court  of  Tennessee,  1866 

(3  Cold.  20) 

Shackelford,  J.,  delivered  the  opinion  of  the  Court. 

This  bill  was  filed  on  the  Chancery  side  of  the  Common  Law  and 
Chancery  Court  at  Memphis,  to  foreclose  a  mortgage  executed 
by  the  defendant,  on  three  lots  in  the  City  of  Memphis,  which  had 
been  duly  registered  to  secure  the  payment  of  two  notes,  of  $2500 
each,  dated  July  22,  1862,  due  in  twelve  and  twenty-four  months 
from  date,  payable  at  the  Union  Bank,  indorsed  by  Stillman  & 
Beach.  The  answer  of  the  defendant  and  the  proof  shows  the  con- 
sideration for  which  the  notes  were  executed  was  Confederate 
Treasury  notes.  The  Chancellor  dismissed  the  bill;  from  which 
the  complainant  has  appealed. 

1  In  Shaw  v.  Carpenter,  54  Vt.  155  the    mortgage    could    be    foreclosed 

(1881),  P  sold  C  his  entire  business  for  that  amount  of  the  consideration 

taking  four  notes  secured  by  a  mort-  which  was  valid,  the  mortgage  being 

gage.     Part  of  the  consideration  for  good  up  to  the  extent  of  the  con- 

these  four  notes  was  illegal,  consist-  sideration  which  was  legal.    Ross,  .!., 

ing  of  spirituous  Hquors  whose  sale  dissented   on    the   ground    that   the 

was  forbidden  by  statute.     A  fore-  contract    was    an    entire    one,    and 

closure   suit   was   brought   by   S,    a  since  part  of  the  consideration  was 

transferee  in  good  faith  and  without  illegal  the  whole  transaction  should 

notice.     Held,  by  majority  of  court,  fall. 


STILLMAN    v.    LOOXEY  229 

It  is  a  well-settled  principle  in  executing  contracts,  if  the  con- 
sideration is  illegal  and  against  public  policy,  the  Court  would  not 
lend  its  active  aid  to  enforce  it.  No  rule  of  law  is  more  clearly 
defined  and  settled  than  this,  in  the  American  and  English  Juris- 
prudence (3  Head.  297  and  723;  6  Bing.  174;  10  Bing.  110).  This 
Court  held  in  the  case  of  Overall  v.  Wright,  deceased,  at  Nashville, 
December  Term,  1865,  in  manuscript,  that  an  agreement  to  credit 
a  payment  in  Confederate  Treasury  notes,  for  which  Mr.  Wurtz 
had  given  his  receipt,  and  on  the  trial  sought  to  have  credited  on 
the  note,  was  no  payment;  that  Confederate  Treasmy  notes  were 
issued  for  an  unlawful  purpose,  and  in  violation  of  the  laws  of  the 
State  and  Constitution  of  the  United  States,  and  that  all  contracts 
founded  upon  them  were  illegal,  and  could  not  be  enforced  through 
the  Courts.  In  the  case  of  Craig  v.  The  State  of  Missouri,  the 
Supreme  Court  of  the  United  States  held  a  promissory  note  given 
for  certificates  issued  at  the  Loan  Office  of  Chariton,  Missouri,  pay- 
able to  the  State  of  Missouri,  under  the  Act  of  the  Legislature 
establishing  Loan  Offices,  was  void  (4  Peters,  410),  the  Act  being  in 
conflict  with  the  Constitution  of  the  United  States. 

In  the  case  under  consideration,  the  notes  were  issued  by  an  un- 
lawful confederation  of  States,  whose  declared  purpose  was  to  over- 
throw the  Constitution.  The  enforcement  of  all  such  contracts  is 
against  public  policy.  The  party  seeking  the  aid  of  the  Com-t  will 
be  repelled.  The  defendant,  not  out  of  any  favor  to  him,  but  be- 
cause he  is  such,  can  allege  and  show  the  illegality  of  the  contract. 
That  being  made  apparent,  the  legal  consequences  follow. 

There  is  no  error  in  the  decree  of  the  Chancellor,  and  the  same 
is  affirmed.^ 

^Accord,     Drexler    v.    Tyrrell,    15  thereafter  they  should  Hve  separate 

Nev.  114  (1880);  Peed  v.  McKee,  42  and  apart  from  each  other  and  that 

la.  689  (1876).  the    husband    would    pay    the    mfe 

Action  for  foreclosure  of  a  mort-  $1,000  per  year.     Some  time  later 

gage    given    to   secure   part    of    the  the  husband  execaited  and  delivered 

purchase   money   of   a   house.     The  to   S   his  bond   for  $17,000   accom- 

defense  was  that  the  house  was  pur-  panied  by  mortgage,  to  secure  said 

chased  to  vendor's  (plaintiff's)  knowl-  pav-ments    to    his    wife.      Suit    wa-s 

edge  for  use  as  a  disorderly  house.  brought  for  foreclosure  of  the  mort- 

Held,  for  plaintiff,  since  the  contract  gage.     Held,  for  defendant,  the  hu.s- 

was    executed.      Hager    v.    O'Neill,  band,    since    the    separation    agree- 

20  Ont.  App.  198,  affirmed  22  Can.  ment,  made  without  the  intervention 

Sup.  510  (1894).    Sedqu.  of   a   trustee,   was   void    as   against 

A  husband  and  wife  entered  into  public    policy   being    in    the   nature 

an    agreement,    without    the    inter-  of  a  contract  to  alter  or  dissolve  the 

vention  of  a  trustee,  providing  that  marriage   relation;    hence,    also,    the 


230  THE   OBLIGATION   SECURED 

McLaughlin  v.  cosgrove 

Supreme  Judicial  Court  of  Massachusetts,  1868 

(99  Mass.  4) 

Writ  of  entry  by  the  heir  of  a  mortgagor  of  land  against  the 
mortgagee  in  possession  after  foreclosure.  In  the  Superior  Court, 
on  agreed  facts  which  are  stated  in  the  opinion,  Reed,  J.,  directed 
a  verdict  for  the  tenant,  and  reported  the  case. 

Chapman,  J.  The  demandant  admits  that  her  ancestor,  Daniel 
McLaughlin,  gave  the  tenant  two  mortgages  of  the  demanded, 
premises;  one  dated  April  25,  1855,  and  the  other  dated  February 
12,  1858;  that  the  tenant  entered  for  foreclosure  on  the  6th  of 
March,  1863;  and  that  the  foreclosure  was  completed  prior  to  the 
commencement  of  this  action.  But  it  appears  that  these  mort- 
gages were  made  to  secure  the  payment  of  notes  which  were  given 
in  payment  for  intoxicating  liquors  illegally  sold  by  the  tenant  to 
the  mortgagor.  By  the  statute  then  existing,  these  notes  were  void ; 
and  it  is  admitted  that,  if  the  mortgage  had  not  been  foreclosed, 
this  action  could  not  be  maintained.  For,  as  a  security  for  a  debt 
made  illegal  by  statute,  the  mortgage  could  not  be  enforced  against 
the  demandant,  who  is  the  heir  of  the  mortgagor.  It  is  necessary, 
then,  to  consider  the  effect  of  the  foreclosure. 

A  deed  of  mortgage  conveys  to  the  mortgagee  the  legal  title  to 
the  land,  subject  to  a  condition.  If  the  condition  be  performed  ac- 
cording to  its  terms,  the  title  of  the  mortgagee  is  thereby  defeated. 
If  not  performed  at  the  day,  the  legal  estate  remains  in  the  mort- 
gagee, and  an  equitable  right  to  redeem  by  payment  at  a  later 
day  is  all  that  remains  in  the  mortgagor,  unless  he  can  show  that 
the  consideration  was  illegal,  in  which  case  he  may  defeat  the  mort- 
gage altogether.  But  if  the  grantee  enters  for  breach  of  the  con- 
dition, and  keeps  possession  till  the  right  to  redeem  is  foreclosed, 

bond     and     mortgage     transaction  suicide.     The  wife  finally  executed 

which   was   to   secure   it.     Boyd   v.  the  mortgage  with  much  reluctance. 

Boyd,    130   App.   Div.    (N.   Y.)    161  The  mortgagees  had  no  knowledge 

(1909).  of  her  hesitation,  and  they  had  not 

A  husband  who  was  a  defaulter,  yet  either  threatened  or  commenced 

urged  his  wife  to  execute  a  mortgage  prosecution  of  her  husband.     Held, 

on  her  land  to  secure  the  sureties  on    foreclosure,    the    mortgage    was 

on  his  bond  telling  her  that  rather  valid.     Lefebvre  v.  Dutruit,  .51  Wis. 

than  go   to  jail,   he  would   commit  326,  8  N.  W.  149  (1881). 


ATWOOD    V.    FISK  231 

he  then  has  an  absolute  title;  and  the  value  of  the  land  is  applied, 
by  operation  of  law,  to  the  payment  of  the  debt  secured  by  the 
mortgage. 

In  a  case  like  the  present,  it  is  as  if  the  mortgagor  had  purchased 
the  liquors,  and  paid  for  them  by  an  absolute  conveyance  of  the 
land.  If,  then,  the  demandant  can  recover,  it  must  be  on  the 
ground  that  the  property  given  in  payment  for  liquors  illegally 
sold  can  be  recovered  back.  But  such  is  not  the  law.  Payments 
made  for  intoxicating  liquors  in  money,  labor  or  personal  property, 
may  be  recovered  back  (Gen.  Sts.  c.  86,  §  61 ;  Walan  v.  Kerhy, 
ante,  1).  But  the  statute  does  not  extend  to  payments  made  in 
real  estate.  The  demandant  has  lost  her  claim  to  the  land  by  not 
bringing  her  action  till  after  the  mortgage  was  foreclosed.^ 

Judgment  for  the  tenant  on  the  verdict. 

ATWOOD  V.   FISK 

Supreme  Judicial  Court  of  Massachusetts,  1869 

(101  Mass.  363) 

Two  bills  in  equity  to  compel  the  surrender  or  cancellation  of 
two  overdue  promissory  notes,  dated  in  1861,  and  signed  by  the 
plaintiffs  respectively,  with  Joseph  Atwood,  each  note  for  the  pay- 
ment by  the  promisors,  jointly  and  severally,  to  the  order  of  the 
defendants,  of  $1340,  in  equal  semi-annual  instalments  of  867. 
with  interest;  and  of  two  mortgages  of  real  estate,  containing  the 
usual  power  of  sale  clauses,  given  by  the  plaintiffs,  respectively,  to 
the  defendants,  to  secure  the  payment  of  the  notes.  The  ground 
on  which  the  bills  were  sought  to  be  maintained  was,  that  the 
consideration  of  the  notes  and  mortgages  was  a  promise  of  the  de- 
fendants to  the  plaintiffs,  to  forbear  to  prosecute  Joseph  Atwood, 
who  was  a  bookkeeper  in  the  employ  of  the  defendants,  for  em- 
bezzling money  of  his  employers;  that  therefore  the  instruments 
were  null  and  void;  but,  that  so  long  as  they  remained  outstand- 
ing, they  constituted  a  cloud  on  the  title  of  the  plaintiffs  in  the 
real  estate,  and  might  be  used  to  the  injury  of  the  plaintiffs  at  some 
future  time  when  evidence  of  the  illegality  of  their  consideration 
should  be  lost.  The  answers  denied  the  plaintiffs'  allegations  con- 
cerning the  consideration  for  the  instruments,  and  alleged  a  lawful 
consideration  therefor.    Issue  was  joined  on  the  answers,  and  the 

1  Accord,  Sample  v.  Barnes,  14  How.  (U.  S.  Sup.  Ct.)  70  (1852). 


232  THE    OBLIGATION    SECURED 

cases  were  reserved  by  Colt,  J.,  on  the  bills,  answers  and  evidence, 
for  the  determination  of  the  full  Court. 

Ames,  J.  A  note,  given  in  consideration  of  a  composition  of 
felony,  or  of  a  promise  not  to  prosecute  for  a  crime  of  a  lower 
degree  than  a  felony,  is  illegal,  and  cannot  be  enforced  by  the  prom- 
isee against  the  promisor.  And  it  makes  no  difference  that,  of 
various  elements  making  up  the  entire  consideration,  a  part,  and 
even  the  lai'ger  part,  was  legal  and  valid.  If  part  of  the  considera- 
tion was  illegal,  the  effect  upon  the  note  would  be  the  same  as  if 
the  whole  were  illegal.  The  plaintiffs  insist  that  the  notes  referred 
to  in  their  bills  of  complaint  fall  within  this  rule  of  law. 

But  it  has  also  long  been  settled  that  the  law  will  not  aid  either 
party  to  an  illegal  contract  to  enforce  it  against  the  other,  neither 
will  it  relieve  a  party  to  such  a  contract  who  has  actualh^  fulfilled 
it,  and  who  seeks  to  reclaim  his  money  or  whatever  article  of  prop- 
erty he  may  have  applied  to  such  a  purpose.  The  meaning  of 
the  familiar  maxim,  in  pari  delicto  potior  est  conditio  dejendentis, 
is  simply  that  the  law  leaves  the  parties  exactly  where  they  stand; 
not  that  it  prefers  the  defendant  to  the  plaintiff,  but  that  it  will 
not  recognize  a  right  of  action,  founded  on  the  illegal  contract,  in 
favor  of  either  party  against  the  other.  They  must  settle  their 
own  questions  in  such  cases  without  the  aid  of  the  courts.  In  the 
somewhat  quaint  language  of  Lord  Chief  Justice  Wilmot  in  Collins 
V.  Blantern,  2  Wils.  350,  "all  writers  upon  our  law  agree  in  this; 
no  polluted  hand  shall  touch  the  pure  fountains  of  justice.  Who- 
ever is  a  party  to  an  unlawful  contract,  if  he  hath  once  paid  the 
money  stipulated  to  be  paid  in  pursuance  thereof,  he  shall  not  have 
the  help  of  a  court  to  fetch  it  back  again;  you  shall  not  have  a  right 
of  action  when  you  come  into  a  court  of  justice  in  this  unclean 
manner  to  recover  it  back.  Procul,  o  procul  este,  profa7ii!"  In 
this  respect  the  rule  in  equity  is  the  same  as  at  law.  Equity  fol- 
lows the  rule  of  the  law,  and  will  not  ihterfere  for  the  benefit  of 
one  such  party  against  a  particeps  criminis.  The  suppression  of 
illegal  contracts  is  far  more  likely  in  general  to  be  accomplished, 
bj''  leaving  the  parties  without  remedy  against  each  other.  And  so 
the  modern  doctrine  is  established,  that  relief  is  not  granted  where 
both  parties  are  truly  in  pari  delicto  (1  Story  Eq.,  §  298;  Claridge 
V.  Hoare,  14  Ves.  59). 

There  is  no  reason  why  equity  should  be  able  to  grant  relief 
upon  principles  different  from  those  recognized  in  courts  of  law.  If 
the  plaintiffs  were  occupying  the  position  of  defendants,  and  if  the 


ATWOOD    V.    FISK  233 

cases  before  us  were  actions  brought  to  recover  the  amount  of  the 
notes  in  question,  they  could  avail  themselves  of  the  maxim 
above  referred  to  by  way  of  defense.  But  they  do  not  stand  in 
that  position.  They  are  themselves  invoking  the  aid  of  the  court 
in  its  equity  jurisdiction,  to  relieve  them  from  a  contract  which  they 
allege  to  be  illegal.  They  are  actors,  or  plaintiffs,  and  apparently 
are  in  a  position  in  which  the  maxim  in  question  can  be  invoked 
and  relied  upon  on  the  other  side.  If  the  notes  were  founded  on 
an  illegal  consideration,  why  should  the  court  lend  its  process  to 
aid  one  party  to  the  illegality,  rather  than  the  other?  What  supe- 
rior equities,  in  that  view  of  the  case,  have  these  plaintiffs  over  the 
defendants?  We  see  no  such  inequality  in  position,  or  abuse  of 
advantages,  as  to  entitle  them  to  the  aid  of  the  court  on  the  ground 
of  public  policy.  If  there  has  been  a  composition  of  a  felony,  or 
a  suppression  of  a  criminal  prosecution,  the  plaintiffs  were  parties 
to  it  as  well  as  the  defendants,  and  it  may  perhaps  be  argued  that 
the  plaintiffs  have  had  the  benefit  of  the  alleged  corrupt  agreement, 
and  are  merely  seeking  to  be  relieved  from  its  inconveniences. 
They  are  seeking  not  to  get  back  money  paid  under  an  illegal  con- 
tract, but  to  recall  notes  and  securities  which  they  have  given 
under  such  a  contract,  a  distinction  which  is  too  slight  to  make 
much  difference  in  the  substantial  equities  of  the  case  {Worcester 
V.  Eaton,  11  Mass.  375). 

We  see  no  occasion  for  the  interference  of  the  court,  as  prayed 
for,  upon  any  view  of  the  case.  If  the  bookkeeper  embezzled  the 
funds  of  his  employers,  he  not  only  committed  a  crime,  but  he  also 
incurred  a  debt.  This  debt  he  was  legally  and  morally  bound  to 
pay,  and  the  defendants  had  a  right  to  make  use  of  all  lawful  and 
proper  means  to  enforce  its  payment  or  to  obtain  security.  The 
rule  of  the  common  law,  that  all  civil  remedies  in  favor  of  a  party 
injured  by  a  felony  are  either  merged  in  the  higher  offense  against 
public  justice,  or  suspended  until  after  the  termination  of  a  crim- 
inal prosecution  against  the  offender,  is  no  part  of  the  law  of 
Massachusetts  (Boston  &  Worcester  Railroad  Co.  v,  Dana,  1  Gray, 
83).  The  fact  that  the  debt  grew  out  of  a  breach  of  trust,  and  had 
its  origin  in  fraud  and  criminality,  is  not  a  reason,  as  a  matter  of 
law,  for  bestowing  upon  the  debtor  any  peculiar  privileges  or  ex- 
emptions. If  the  suppression  of  a  criminal  prosecution  was  one  of 
the  considerations  for  the  contracts  made  and  securities  given  by 
the  plaintiffs,  they  can  avail  themselves  of  that  fact  as  a  defense 
in  any  suit  at  law  against  them  upon  such  contracts.  They  are 
in  no  danger  of  losing  the  benefit  of  that  defense  in  consequence 


234  THE    OBLIGATION    SECUREID 

of  any  transfer  of  the  notes  to  a  third  person.  Some  of  the  in- 
stahnents  were  overdue  and  unpaid,  and  for  that  reason  no  indorsee 
could  so  hold  them  as  to  deprive  the  plaintiffs  of  their  defence.  As 
to  the  exercise  by  the  mortgagees  of  the  power  of  sale  given  by  the 
terms  of  the  mortgages,  it  cannot  be  difficult  for  the  plaintiffs  to  see 
that  any  purchaser  at  such  sale  should  be  fully  notified  (if  notice 
should  be  thought  necessary)  of  all  grounds  of  objection  to  the 
notes  and  mortgages,  and  of  their  intention  to  contest  any  title 
which  such  purchaser  shall  venture  to  buy  at  the  sale.  It  is  well 
settled  that  all  defenses  (except  the  statute  of  limitations)  that 
can  be  made  against  the  notes,  can  also  be  made  against  the  mort- 
gages (Vinton  v.  King,  4  Allen,  562). 

Whether  the  evidence  reported  can  be  said  to  prove  the  alleged 
illegality  in  the  contract  is  a  question  which  we  have  not  found  it 
necessary  to  decide,  or  even  to  consider.  In  any  view  that  can  be 
taken  of  that  question,  the  plaintiffs  are  not  in  a  position  to  claim 
the  equitable  relief  prayed  for;  and  therefore,  in  each  case,  the 

Bill  is  dismissed,  with  costs  for  the  defendants} 

1  Accord,  Patterson  v.  Donner,  48  Oh.    Rep.   38    (1846) ;    McQuade  v. 

Cai.  369  {\S7 4:)  lAlbertsonv.Loughlin,  Rosecrans,   36   Oh.    St.    442    (1881). 

173  Pa.  St.  529  (1896).  Pearce   v.    Wilson,    111    Pa.   St.    14 

Cf.  Raguet  v.  Roll,  7  Oh.  Rep.  70  (1885)   is  contra  to  Raguet  v.  RoU, 

[429]   (1836);  Cowles  v.  Raguet,   14  supra. 


V3  0»n-A    ''^    '    VJ 


\^ovt>oV-<^«^ 


CHAPTER   III.    (Continued) 
Section  III. — Future  Advances 

PETTIBONE  V.   GRISWOLD 

Supreme  Court  of  Errors  of  Connecticut,  1822 

(4  Conn.  158) 

This  w^^^  ^  ^'J^  ^"  chancery  to  foreclose  the_equity  of  redemp- 
tion of  the  defendants  m  certain  mortgaged  premises.  The  bill  ( 
"statecC  that  on  the  3d  day  of  July,  1815,  Giles  Griswold,  for  the  ,' 
consideration  of  4000  dollars,  conveyed  to  the  plaintiff's  testator 
three  pieces  of  land  in  Burlington,  by  a  deed  containing  the  usual  \ 
covenants  of  seisin  and  warranty,  to  which  there  was  a  condition  \ 
annexed,  that  if  the  said  Giles  Griswold,  his  executoi-s,  &c.,  should 
pay  said  grantee  one  note  of  even  date  therewith,  executed  to  said 
grantee,  for  4000  dollars,  payable  in  six  months,  at  the  Hartford 
bank,  and  all  other  notes  the  said  grantee  might  indorse,  or  give, 
for  said  Griswold,  at  the  bank  or  elsewhere,  and  all  receipts  said 
Pettibone,  deceased,  might  hold  against  the  said  Griswold,  then 
said  deed  to  be  void;  that  before  the  execution  of  this  deed,  the 
plaintiff's  testator,  with  Griswold,  executed,  for  Griswold's  benefit, 
two  joint  notes,  one  to  Seth  Cowles,  dated  the  19th  of  April,  1814, 
for  2173  dollars,  97  cents,  payable  in  six  years  from  the  date  thereof, 
with  interest  annually,  and  one  to  Elijah  Cowles  &  Co.  of  the  same 
date,  for  296  dollars,  95  cents,  payable  in  six  years,  with  interest 
annually;  for  which  Griswold  gave  his  receipt  to  the  plaintiff's 
testator,  and  agreed  to  exonerate  and  indemnify  hun  against  all 
claims  and  demands  on  account  of  said  notes;  that  on  the  19th 
of  September,  1815,  Griswold  also  received  of  the  plaintiff's  testator 
sundry  notes  of  hand,  amounting  to  1148  dollars,  62  cents,  dated  the 
21st  of  February,  1815,  for  which  Griswold  gave  his  receipt,  prom- 
ising to  account  with  the  plaintiff's  testator  on  said  joint  note  to 
Elijah  Cowles  &  Co.;  that  the  mortgaged  premises  have  been  levied 
upon,  by  several  creditors  of  Griswold,  and  set  off  to  them,  respec- 

235 


236  THE    OBLIGATION    SECURED 

Itively,  on  execution;  that  Griswold  had  not  paid  and  indemnified 
the  plaintiff's  testator  for  all  the  notes  that  he  had  indorsed  or 
given  for  him;  nor  had  Griswold  paid  all  the  receipts  the  plaintiff's 
testator  held  against  him,  but  the  notes  given  by  the  plaintiff's 
testator  to  Seth  Cowles  and  Elijah  Cowles  &  Co.  remain  entirely 
unpaid  by  Griswold,  but  have  been  principally  satisfied  by  the 
plaintiff's  testator,  and  his  estate  is  liable  for  the  residue,  Gris- 
wold being  a  bankrupt;  nor  had  Griswold  ever  paid  and  satisfied 
his  receipt  of  the  9th  of  September,  according  to  the  tenor  thereof, 
but  the  plaintiff  now  holds  the  same  unsatisfied.  There  were  other 
averments,  on  which  no  question  arose. 
/  To  this  bill  the  defendants  demurred ;  and  the  case  was  reserved 
for  the  advice  of  all  the  judges. 

HosMER,  Ch.  J.  The  plaintiff  has  brought  his  bill  to  foreclose 
a  mortgage,  the  condition  of  which  is,  to  secure  to  the  mortgagee 
the  payment  of  a  note  accurately  described,  which,  it  is  presumed, 
has  been  paid,  as  there  is  no  allegation  of  non-payment;  and  like-^ 
wise  to  secure,  "all  other  notes  the  said  grantee  might  indorse  for 
or  give  for  said  Griswold,  at  the  bank  or  elsewhere,  and  all  re- 
ceipts said  Pettibone,  deceased,  might  hold  against  said  Griswold." 
The  land  mortgaged  has  been  levied  on,  by  executions  against  the 
mortgagor;  and  the  controversy  is  between  the  mortgagee  and  the 
execution  creditors. 

The  notes  of  hand  given  to  Seth  Cowles  and  Elijah  Cowles  and 
Co.  were  in  existence  at  the  date  of  the  mortgage,  and  are  not  in- 
cluded in  the  condition.  They  might  and  ought  to  have  been  de- 
scribed, or  embraced,  by  some  intelligible  description  of  them.  But 
the  expression,  "all  notes  the  said  grantee  might  indorse  for  or 
give  for  said  Griswold,"  manifestly  refers  to  future  contracts,  and 
not  to  notes  then, existing.  The  receipt  of  the  19th  of  September, 
1815,  renders  it  necessary  to  proceed  further  in  the  discussion  of 
this  case,  or  the  preceding  observations  would  be  conclusive  on  the 
whole  controversy. 

On  the  extent  to  which  a  mortgage  may  be  taken,  I  shall  not 
express  a  definite  opinion,  as  the  exigencies  of  the  case  do  not  re- 
quire it.  It  undoubtedly  may  be  for  existing  debts,  existing  lia- 
bilities and,  perhaps,  for  debts  to  be  contracted  in  future.  But 
the  manner  in  which  it  may  be  done,  forms  an  important  considera- 
tion. It  is  the  policy  of  our  laws,  and  experience  has  demonstrated 
the  wisdom  of  it,  that  the  title  to  real  estate  should  be  registered 
for  the  benefit,  not  of  the  parties,  but  of  creditors  and  all  others 


PETTIBONE    V.    GRISWOLD  237 

interested.  "All  grants  and  mortgages  of  houses  and  lands  shall 
he  recorded  at  length  by  the  town  clerk;  and  no  deed  shall  he  ac- 
counted good  and  effectual  to  hold  such  houses  and  lands  against 
any  other  person  or  persons  but  the  grantor  or  grantors  and  their 
heirs  only,  unless  recorded  as  aforesaid"  (Stat.  302,  §9).  It  is 
the  object  of  this  law  to  prevent  fraud  and  give  security  and  stabil- 
ity to  title.  It  results,  unquestionably,  that  the  condition  of  a 
mortgage  deed  must  give  reasonable  notice  of  the  incumbrances 
on  the  land  mortgaged.  A  creditor  is  not  obliged  by  law  to  make 
inquiry  in  pais  concerning  the  liens  on  the  property  of  his  debtor; 
but  on  application  to  the  record  he  may  acquire  all  the  information 
which  his  interest  demands.  At  least,  he  must  have  the  power  of 
knowing  from  this  source  the  subject-matter  of  the  mortgage, 
that  his  investigation  may  be  guided  by  something  which  will 
terminate  in  a  certain  result.  And  what  is  not  of  less  impor- 
tance, the  incumbrance  on  the  property  must  be  so  defined  as 
to  prevent  the  substitution  of  eveiything  which  a  fraudulent 
grantor  may  devise  to  shield  himself  from  the  demands  of  his 
creditors.  , 

The  condition  of  the  deed  under  discussion,  is  dangerously  in-| 
definite  and  is  at  war  with  the  policy  of  the  recording  system. 
It  embraces  all  future  notes  and  receipts  without  the  designation 
of  any,  and  baffles  the  inquiry  of  creditors  and  others  relative  to 
the  condition  of  the  mortgaged  estate.  A  condition  to  a  deed  made 
to  secure  all  future  supplies,  debts  and  liabilities,  of  every  possible 
nature  and  description,  would  not  be  more  lax  and  indefinite.  The 
creditor  could  know  nothing  from  an  examination  of  the  record, 
and  must  be  cast  on  his  debtor  for  information,  the  very  person 
who  would  be  least  inclined  to  give  it:  and  successive  obligations, 
fictitious  or  actual,  might  be  made  to  lock  up  his  land,  in  defiance 
of  every  claim  against  him. 

I  am  well  aware  that  absolute  certainty  is  not  always  to  he  ex- 
pected from  an  examination  of  the  records  of  land  titles;  but  there 
always  may  and  ought  to  be  a  certain  object  after  which  suitable 
inquiries  may  be  made.  A  mortgage  may  be  given  to  indemnify 
a  person  from  damages  arising  by  reason  of  his  having  become  the 
surety  of  another  in  the  office  of  sheriff  or  collector;  or  as  admin- 
istrator on  an  estate.  In  all  these  cases  an  inquiring  creditor 
cannot  know  from  the  town  record  the  precise  incumbrance;  but 
he  has  notice  of  certain  definite  facts,  which  point  to  and  guide 
him  in  the  necessary  investigation  on  the  subject.  Cases  of  this 
description  must  not  be  confounded  with  conditions  to  deeds,  which 


238  THE    OBLIGATION    SECURED 

neither  communicate  any  certain  information  nor  designate  any 
track  in  pursuance  of  which  information  may  be  obtained. 
The  other  Judges  were  of  the  same  opinion. 

Judgment  to  be  entered  for  defendants.^ 


STOUGHTON  v.   PASCO 

Supreme  Court  of  Errors  of  Connecticut,  1825 

(5  Conn.  442) 

This  was  a  bilHn^chancery^JbiQUght  jy  Stoughton,  to  red.efim, 
mortgaged  preflnjggs. 

The  plaintiff  and  Jonathan  Pasco  were  trustees  of  the  goods  and 
effects  of  one  Stephen  Heath,  deceased,  for  the  benefit  of  certain 
legatees,  according  to  his  last  will  and  testament.  The  amount  of 
the  property  in  the  hands  of  the  trustees,  in  February,  1812,  which 
had  been  inventoried,  was,  at  the  inventory  price,  6501  dollars,  28 
cents,  and  of  property  not  inventoried,  302  dollars,  50  cents.  On 
the  8th  of  February,  1823,  Jonathan  Pasco,  as  trustee  as  aforesaid, 
was  justly  indebted  to  the  plaintiff  in  a  large  sum,  the  amount  of 
which  was,  at  that  time,  unascertained.  To  secure  such  sum,  on 
the  day  last-mentioned,  he  executed  a  mortgage  deed  of  the  prem- 
ises to  the  plaintiff,  which  was  duly  recorded,  with  a  condition 
subjoined  in  these  words:  "If  said  Pasco  shall  pay  to  said  Stough- 
ton all  monies  in  his  hands  belonging  to  the  estate  of  Stephen  Heath, 
deceased;  and  also  deliver  to  said  Stoughton  all  notes  and  other 
securities  for  money  belonging  to  said  estate  in  his  hands;  and 
shall,  in  all  respects,  render  to  said  Stoughton  a  true  account  of  all 
monies  and  securities  for  the  payment  of  money  belonging  to  said 
estate,  within  twenty  days  from  this  date;  and  shall  pay  to  said 
Stoughton  his  the  said  Pasco's  note  of  land,  payable  to  said  Stough- 
ton, for  the  sum  of  210  dollars,  on  demand,  with  interest,  dated 
March  5th,  1814;  then  this  deed  to  be  void,"  &c.  The  court 
found,  that  there  was  due  to  the  plaintiff  from  said  Pasco  for 
monies  and  effects  in  his  hands  of  the  estate  of  Stephen  Heath,  de- 
ceased, intended  to  have  been  secured  by  said  mortgage  deed,  the 

^  Accord,  North  V.  Belden,  13  Conn.  Bullock  v.  BaUenhousen,  108  111.  28 

376    (1840);   Branhall   v.    Flood,   41  (1883).     Compare  Bell  v.  Fleming's 

Conn.  68  (1874);  Stearns  v.  Porter,  Exrs.,  12  N.  J.   Eq.    1,   490   Cl858, 

46  Conn.  313  (1878) ;  Garher  v.  Henry,  1859). 
6  Watts,    (Pa.),   57    (1837),   semhle; 


STOUGHTON    V.    PASCO 


23& 


sum  of  3137  dollars,  85  cents;  besides  the  amount  of  the  note  men- 
tioned in  the  mortgage.  By  subsequent  deeds,  dated  the  8th  and 
22d  of  February,  1823,  and  duly  recorded,  Jonathan  Pasco  mort- 
gaged the  premises  to  Ashna  Pasco,  after  a  computation  between 
the  said  Jonathan  and  the  plaintiff,  ascertaining  the  debt  due  to 
the  latter.  Before  the  execution  of  these  mortgages,  and  before 
the  debts  secured  by  them  had  accrued,  Ashna  Pasco  had  notice,  by 
information  from  Jonathan,  of  such  computation  and  settlement, 
and  that  the  sum  due  to  the  plaintiff  was  more  than  2800  dollars. 

Jonathan  and  Ashna  Pasco  were  made  parties  defendants  to  the 
bill.  As  against  Jonathan  the  court  decreed  a  foreclosure,  but  de- 
nied the  relief  sought  against  Ashna,  considering  the  mortgage  in 
question  to  be  void  in  relation  to  him.  To  review  this  determina- 
tion, the  plaintiff  procured  the  record  to  be  transmitted  to  this 
Court,  pursuant  to  the  statute. 


HosMER,  Ch.  J.  The  general  question  in  this  case  is  whether 
the  mortgage  made  by  Jonathan  Pasco  to  the  plaintiff  is  void  in 
respect  of  Ashna  Pasco,  a  subsequent  mortgagee,  except  as  re- 
gards a  small  debt  by  promissory  note. 

The  objection  made,  on  the  defendant's  part,  to  the  granting  of 
the  prayer  of  the  plaintiff's  bill,  is  founded  on  the  law  requiring 
the  recording  of  deeds.  It  is  insisted  that  the  policy  of  the  re- 
cording system  will  be  violated  by  giving  validity  to  a  mortgage, 
containing,  as  the  one  in  question  is  supposed  to  do,  no  reason- 
able certainty  in  the  description  of  the  debt  intended  to  be  se- 
cured. The  determination  of  this  Court  in  Pettibone  v.  Griswold, 
4  Conn.  Rep.  158,  is  principally  relied  on;  and  is  claimed  to  sustain 
the  defendant's  objection. 

There  are  two  questions  embraced  in  the  present  case.    TY\p  iiy^ii 

is^.j^hether  the  demand_Ql_Stoughton  is  of  such  a  nature  as  to 

authorize  the  mortgage  securityj  and  the  second  is,  whether  it  is 

describea  with  such  reasonable  certainty  that,  m  respect  of  it,  a 

Subsequent  mortgagee  is  logally  affected  with  noticed 

r.'ln  Pettibone  v.  Grisivold~  before  cited,  it  was  said,  that  a 
mortgage  may  be  taken  "for  existing  debts,  existing  habilities,  and 
perhaps  for  debts  to  be  contracted  in  future."  The  court  has  j 
found,  that  Jonathan  Pasco  was  justly  indebted  to  the  plaintiff,  as  , 
trustee  on  Heath's  estate,  in  the  sum  of  3137  dollars,  85  cents;  and 
that  this  sum  was  intended  to  be  secured  by  the  mortgage  deed  to 
Stoughton.  The  precise  sum  of  money  due  to  the  plaintiff  had  not 
been  ascertained  at  the  date  of  the  mortgage;  and  hence  the  phrase- 


240  THE    OBLIGATION    SECURED 

/  ology  of  the  condition,  that  if  Jonathan  Pasco  should  pay  to 
Stough'ton  all  the  monies,  and  deliver  to  him  all  the  securities  for 
money  in  his  hands,  belonging  to  Heath's  estate,  and  render  a  true 
account,  the  deed  should  be  void.  That  Jonathan  Pasco  was  under 
a  legal  obligation  to  do  what  he  stipulated,  and  that,  as  to  him, 
Stoughton  had  a  just  demand,  to  the  extent  of  the  stipulation, 
must  be  implied  by  every  one  who  reads  the  above  condition.  It 
would  not  enter  into  the  imagination  of  any  one  that  the  mortgage 
was  for  a  sum  of  money  not  due;  and  that,  contrary  to  common 
sense  and  universal  usage,  Pasco  had  made  a  pledge  of  his  estate 
to  secure  to  the  plaintiff  a  mere  gratuity.  But  this  point  need  be 
pursued  no  further,  as  the  court,  in  the  decree  passed,  considered 
the  mortgage  valid  as  between  the  parties. 

2.  The  question  remains  whether  the  demand  of  the  plaintiff  is 
described  in  the  mortgage,  with  such  reasonable  certainty,  as  from 
the  record  to  affect  a  subsequent  mortgagee  with  notice. 

Now,  what  would  such  person  understand  from  reading  the  afore- 
said condition?  On  the  principle  of  constructive  notice  of  the 
record,  the  subsequent  mortgagee  must  be  supposed  to  have  read 
the  deed  with  its  condition;  and  hence  the  propriety  of  the  pro- 
posed question.  On  such  perusal,  he  must  be  presumed  to  know 
that  the  mortgage  was  for  a  debt  in  some  manner  resulting  from 
the  trust  estate  in  the  mortgagor's  hands,  due  to  the  co-trustee, 
the  plaintiff;  that  the  precise  amount,  at  the  date  of  the  mortgage, 
was  not  ascertained;  that  it  embraced  all  the  monies  and  securities 
of  Heath,  in  the  hands  of  Pasco;  and  that  this  person  had  bound 
himself  to  render  a  true  account  of  his  indebtedness.  In  addition 
to  this,  let  it  be  remembered  that  Ashna  Pasco,  previous  to  the 
delivery  of  either  deed  to  him,  had  information  from  his  mortgagor 
that  the  account  between  Jonathan  Pasco  and  Stoughton  had  been 
adjusted,  and  that  the  sum  now  claimed  as  a  debt  was  acknowl- 
edged to  be  due. 

I  That  the  condition  of  a  mortgage  deed  must  give  reasonable 
notice  of  the  incumbrance  on  the  land  mortgaged,  is  an  established 
principle.  This  is  the  undoubted  criterion,  by  which,  in  respect  of 
third  persons,  the  validity  of  the  mortgage  is  to  be  tested.  What, 
then,  is  reasonable  notice?  Is  it  requisite  that  the  condition 
should  be  so  completely  certain,  in  every  particular,  as  to  preclude 
the  necessity  of  all  extraneous  enquiry?  Certainly  not.  It  was 
adjudged  in  Pettibone  v.  Griswold,  before  cited,  that  a  mortgage  to 
indemnify  a  surety  for  the  official  good  conduct  of  another  is  valid 
universally;  and  yet  the  event  on  which  an  indebtedness  may 


STOUGHTON    V.    PASCO  241 

arise,  as  well  as  the  amount,  are  utterly  unforeseen  and  contingent. 
Without  a  specification  of  either  of  these  facts,  there  exists  that 
reasonable  notice  which,  in  favor  of  those  who  are  not  parties  to 
the  mortgage,  the  law  demands.  The  object  of  the  recording  law 
is  to  prevent  fraud  on  purchasers  and  creditors;  and  such  facts 
must  be  reasonably  notified  as  are  sufficient  for  this  purpose:  but, 
as  has  been  shewn,  notice  perfect  and  complete,  without  any  en- 
quiry dehors  the  record,  is  not  required. 

One  head  of  presumptive  notice  is  this:  that  the  law  imputes  to) 
the  purchaser  the  knowledge  of  a  fact,  of  which  the  exercise  ofi 
common  prudence  and  ordinary-  diligence  must  have  apprized  himi 
Hence  it  has  become  a  principle  in  a  court  of  equity,  that  the  no 
tice  which  presents  a  certain  object,  concerning  which  successfu 
enquiries  without  unreasonable  inconvenience  may  be  made,  i: 
suflficient.  In  Peters  v.  Goodrich,  3  Conn.  Rep.  150,  the  above 
principle  was  recognized  and  applied.  Curtis  executed  a  mortgage 
deed  to  Goodrich,  which  was  duly  recorded,  with  condition  to  in- 
demnify him  against  a  promissory  note,  of  which  the  latter  was 
an  indorser.  To  foreclose  the  equity  of  redemption,  a  bill  was 
brought  by  Goodrich,  from  which  it  appeared  that  the  mortgage 
was  variant  from  the  note,  both  in  respect  of  its  date  and  of  the 
person  to  whom  it  was  payable.  The  defendant,  who  was  a  subse- 
quent mortgagee,  objected  against  the  correction  of  these  mistakes, 
upon  the  specific  ground  that  the  description  in  the  mortgage  deed 
must  be  precisely  adhered  to,  pursuant  to  the  supposed  policy  of 
the  recording  system.  In  the  delivery  of  their  opinion  the  court 
observed,  that  "as  between  the  parties,  it  is  unquestionably  clear 
that  the  misconception  of  the  date  of  the  note  and  of  the  promise, 
admitted  of  correction,  on  the  common  principles  applied  in 
chancery  in  similar  cases;  and  the  second  mortgagee  had  such  con- 
structive notice  of  the  fact  from  the  recorded  deed  as  placed  him 
in  no  better  condition  than  the  mortgagor.  Whatever  is  sufficient 
to  put  a  person  on  inquiry  is  considered  in  equity  to  convey  notice; 
for  the  law  imputes  to  a  person  the  knowledge  of  a  fact  of  which 
the  exercise  of  common  prudence  and  ordinary  diligence  must 
have  apprized  him.  Had  the  second  mortgagee  applied  to  Good- 
rich for  information,  as  it  was  his  intention  to  represent  the  facts 
correctly,  relative  to  the  mistakes,  he  would  have  had  a  communi- 
cation of  all  the  knowledge  he  now  possesses." 

The  same  principle  was  recognized  by  the  court  in  Pettibone  v. 
Griswold,  before  cited.  After  having  declared  it  to  be  the  policy 
of  our  law  that  the  title  to  real  estate  should  be  registered  for  the 


242  THE    OBLIGATION    SECURED 

benefit  of  creditors  and  all  others  interested,  it  was  observed  by  the 
court:  "That  it  is  the  object  of  this  law"  (the  act  requiring  deeds 
to  be  recorded)  "  to  prevent  fraud,  and  give  security  and  stabihty 
to  title.  It  results,  unquestionably,  that  the  condition  of  a  mort- 
gage deed  must  give  reasonable  notice  of  the  incumbrances  on  the 
land  mortgaged.  A  creditor  is  not  obliged  by  law  to  make  enquiry 
in  pais  concerning  the  liens  on  the  property  of  his  debtor;  but  on 
application  to  the  record,  he  may  acquire  all  the  information  which 
his  interest  demands;  at  least,  he  must  have  the  power  of  knowing 
from  this  source  the  subject-matter  of  the  mortgage,  that  his  in- 
vestigation may  be  guided  by  something  which  will  terminate  in  a 
certain  result.  And  what  is  not  of  less  importance,  the  incum- 
brance on  the  property  must  be  so  defined  as  to  prevent  the  substi- 
tution of  everything  which  a  fi'audulent  grantor  may  devise  to 
shield  himself  from  the  demands  of  his  creditors."  In  the  argu- 
ment of  this  case  it  has  been  supposed  that  the  court,  in  Petti- 
bone  V.  Griswold,  had  required  perfect  and  complete  certainty  in 
the  condition  of  a  mortgage,  so  far  as  relates  to  strangers  to  the 
transaction,  and  to  such  a  degree  as  to  preclude  the  necessity  of  any 
further  enquiry.  But  the  error  is  most  obvious  and  resulted  en- 
tirely from  the  construction  of  a  single  sentence  in  the  opinion 
expressed,  disjoined  from  all  other  parts  of  it;  as  if  it  had  been  de- 
clared in  the  form  of  an  axiom,  and  were  insulated  and  alone. 
I  readily  admit  that  the  paragraph  immediately  succeeding  the 
rule  relative  to  notice,  was  not  expressed  with  a  precision  that  de- 
fies all  criticism.  Instead  of  the  expression  "concerning  the  liens," 
more  correctly  it  should  have  been  "concerning  the  existence  of  the 
liens."  It  was  expected,  however,  to  receive  its  construction  as 
being  the  part  of  an  entire  subject,  each  sentence  contributing 
something  to  the  precise  development  of  the  court's  opinion;  in 
pursuance  of  the  maxim.  Ex  antecedentihus  et  consequentibus  fit 
optima  interpretatio.  More  especially  may  it  be  demanded,  that 
it  be  read  with  this  qualification:  "at  least,  he  must  have  the 
power  of  knowing  from  this  source,"  i.  e.,  from  the  condition  of  the 
deed,  "the  subject-matter  of  the  mortgage,  that  his  investigation 
may  be  guided  by  something  which  will  terminate  in  a  certain  re- 
sult." It  is  extremely  obvious  that  the  case  of  Pettibone  v.  Gris- 
wold was  not  affected  by  the  preceding  principles;  and  this  may 
account  for  their  being  perhaps  more  loosely  expressed  than  they 
would  have  been,  had  a  close  application  of  them  been  required. 
The  mortgage  in  that  case  embraced  all  future  notes  and  receipts, 
without  the  designation  of  Siny,  and  supplied  neither  information^ 


STOUGHTON   V.   PASCO  243 

t2or  the  -probable  means  of  successful  enquiry;  and,  as  there  was  no 
imaginable  check  on  the  substitution  of  notes  and  receipts  at  pleas- 
ure, and  without  limitation  of  time,  the  policy  of  the  recording 
system,  if  such  mortgage  were  vahd,  would  effectually  be  defeated. 
A  condition  to  a  deed  made  to  secure  all  future  supplies,  debts  and 
liabilities,  would  not  be  more  dangerously  lax  and  indefinite. 

The  principle  contended  for  by  the  defendants  is  refuted  by  the 
case  of  Peters  v.  Goodrich,  by  the  expressions  already  recited  from 
Pettibone  v.  Griswold,  and  by  other  parts  of  the  same  case.  The 
latter  case  requires  that  the  record  should  contain  sufficient  infor- 
mation relative  to  the  subject-matter  of  a  mortgage  to  direct  the 
enquirer  to  the  necessary  intelligence,  and  to  prevent  a  debtor,  by 
extreme  indefiniteness  and  generahty,  from  the  substitution  of 
every  possible  demand  at  his  pleasure.  "I  am  well  aware"  (said 
the  Judge,  when  delivering  the  opinion  of  the  court)  "that  absolute 
certainty  is  not  to  be  expected  from  an  examination  of  the  records 
of  land  titles;  but  there  always  may  and  ought  to  be  a  certain 
object  after  which  suitable  enquiries  may  be  made.  A  mortgage 
may  be  given  to  indemnify  a  person  from  damages  arising  by  rea- 
son of  his  having  become  the  surety  of  another,  in  the  office  of 
sheriff  or  collector,  or  as  administrator  on  an  estate.  In  all  these 
cases  an  enquiring  creditor  cannot  know  from  the  record  the  pre- 
cise incumbrance;  but  he  has  notice  of  certain  definite  facts,  which 
point  to  and  guide  in  him  the  necessary  investigation  on  the  sub- 
ject. Cases  of  this  description  must  not  be  confounded  with  con- 
ditions to  deeds  which  neither  communicate  any  certain  informa- 
tion nor  designate  any  track,  in  pursuance  of  which  information 
may  be  obtained." 

In  the  transaction  of  business,  the  exigencies  of  it  not  unfre- 
quently  require  that  the  conditions  of  mortgage  deeds  should  be  as 
uncertain  as  the  one  under  discussion;  and  such  mortgages  are 
unquestionably  legal.  Both  private  justice  and  the  convenience 
of  the  public  demand  that  they  should  be  considered  valid.  The 
case  of  mortgages  for  the  indemnity  of  sureties,  has  already  been 
mentioned.  A  mortgage  to  secure  an  unliquidated  book  debt,  or 
the  fideHty  of  a  factor  or  bailiff,  whose  business  it  is  to  receive 
money  and  pay  it  over,  \mdoubtedly  would  be  good;  and  yet  there 
is  nothing  certain  here  but  the  subject-matter  of  the  stipulation. 

What,  then,  is  the  fatal  uncertainty  existing  in  the  description 
of  the  (lebt  and  obligation  of  Jonathan  Pasco?  The  sum  of  the 
indebtedness  was  not,  and  could  not  be,  specified;  nor  was  it  neces- 
sary that  it  should  be;  but  the  subject-matter  of  the  mortgage  was 


244  THE    OBLIGATION    SECURED 

explicitly  stated.  The  subsequent  mortgagee  had  notice  from  the 
record  that  Jonathan  Pasco  was  indebted;  and  that  he  was  ac- 
countable to  the  plaintiff  for  all  the  monies,  and  securities  for 
money,  of  Heath.  What  the  original  amount  was,  the  inventory  of 
Heath's  estate  would  inform  him;  and  he  would  have  experienced 
no  difficulty  in  ascertaining  the  precise  sum  and  manner  of  Jona- 
than Pasco's  indebtedness.  He  was  informed,  by  the  mouth  of  his 
mortgagor,  that  a  settlement  had  been  made  between  him  and  the 
plaintiff;  and  that  the  balance  due  surmounted  twenty-eight  hun- 
dred dollars.  Instead  of  effectuating  the  pohcy  of  the  recording 
system  by  an  invalidation  of  the  plaintiff's  mortgage,  the  court 
would,  in  that  event,  be  instrumental  in  the  perpetration  of  a 
hardship  most  inequitable.  The  free  use  and  disposal  of  a  person's 
property,  where  neither  law  nor  policy  forbids,  would  be  inhibited; 
the  exigencies  of  business,  in  promotion  of  the  general  conven- 
ience, disregarded;  and  the  impracticable  principle,  in  all  cases, 
that  mortgage  conditions  must  contain  within  themselves,  not  rea- 
sonable certainty  only,  but  a  certainty  to  a  certain  intent  in  every 
particular,  adopted.  This  would  be  conformable  neither  to  correct 
principles  nor  to  our  own  adjudications. 

Peters,  J.,  was  of  opinion  that  this  case  was  not  distinguishable 
in  principle  from  Pettibone  v.  Griswold;  and  would,  therefore, 
affirm  the  decree  of  the  superior  court. 

Brainard,  J.,  concurred  with  the  Chief  Justice. 

Bristol,  J.,  said  that,  aside  from  the  case  of  Pettibone  v.  Gris- 
wold, he  should  have  no  doubt  that  the  mortgage  in  question  was 
good;  but  that  case  had  produced  some  hesitation  in  his- mind;  and 
he  was  inclined  to  think  that  the  present  case  must  be  governed 

by  it. 

Decree  reversed. 


ROBINSON  V.  WILLIAMS 

Court  of  Appeals  of  New  York,  1860 

(22  A^  Y.  380) 

Appeal  from  the  Superior  Com-t  of  the  city  of  Buffalo.  Action 
by  the  receiver  of  the  Hollister  Bank,  against  Williams,  the  receiver 
of  the  Reciprocity  Bank,  and  other  defendants,  for  the  foreclosure 
of  a  mortgage.  Prior  to  September,  1857,  both  banks  were  doing 
business  in  the  city  of  Buffalo. 


ROBINSON    V.    WILLIAMS  245 

Upon  the  trial  these  facts  were  proved:  On  the  24th  of  Octo- 
ber, 1854,  the  defendants  Gibson  and  wife  executed  and  deUvered  f 
a  mortgage  to  the  HolHster  Bank,  which  recited  that  in  considera- 
tion of  the  sum  of  SI  to  them  in  hand  paid,  and  for  the  purposes 
thereinafter  declared  and  stated,  they  granted  and  conveyed  to 
said  bank  certain  premises  therein  particularly  described.  The 
mortgage  contained  a  further  recital  as  follows:  "Whereas,  it  is  con- 
templated that  the  said  party  of  the  second  part  will  hereafter 
from  time  to  time  make  loans  or  advances,  by  way  of  discount  or 
otherwise,  to  the  said  Charles  D.  Gibson,  upon  drafts,  bills  of  ex- 
change, promissory  notes  and  commercial  paper,  either  made  and 
drawn,  or  accepted  or  indorsed  by  said  Gibson,  and  it  has  been 
agreed  that  these  presents  shall  be  executed  to  indemnify  and  se- 
cure the  said  party  of  the  second  part  on  account  of  any  such  loans, 
advances  or  discounts:  Now  therefore  the  condition  of  these  pres- 
ents is  expressly  this:  that  if  the  said  Charles  D.  Gibson,  his  heirs, 
&c.,  shall  and  do  well  and  truly  pay,  retire  and  take  up  at  matu- 
rity any  and  all  such  drafts,  bills  of  exchange,  promissory  notes  or 
commercial  paper,  as  may  be  discounted  or  advanced  upon  by  the 
said  party  of  the  second  part,  for  or  to  the  said  Gibso7i,  and  shall 
well  and  truly  pay  at  maturity  all  and  every  such  loans,  discounts 
or  advances,  as  above  recited,  and  shall  well  and  truly  indemnify, 
pay  and  save  harmless  the  said  party  of  the  second  part  from  and 
against  all  loss,  costs,  damages,  expenses  and  interests  by  reason 
thereof,  then  these  presents  shall  cease  and  be  null  and  void."  But 
in  case  of  the  non-fulfilment  of  the  above  conditions,  then  the  party 
of  the  second  part  was  authorized  to  sell  the  mortgaged  prem- 
ises and  to  make  and  execute  to  the  purchaser  a  deed  therefor. 

The  mortgage  was  duly  acknowledged  on  the  25th  of  October, 
1854,  and  recorded  on  that  day  in  the  Clerk's  office  of  Erie  County. 
On  the  1st  of  December,  1855,  the  defendant  Gibson  drew  his  bill 
of  exchange  on  one  Greenleaf,  at  Boston,  whereby  he  requested 
said  Greenleaf  to  pay  to  his  own  order  the  sum  of  $2500,  sixty 
days  from  the  date  thereof;  and  before  said  bill  became  due  and 
payable  Gibson  indorsed  the  same  to  the  Hollister  Bank,  which, 
on  the  faith  and  security  of  said  bill  and  said  mortgage,  discounted 
the  same  and  advanced  to  said  Gibson  the  amount  thereof.  This 
bill  was  protested  at  maturity,  and  no  part  thereof  has  ever  been 
paid.  On  the  29th  of  December,  1855,  Gibson  drew  another  bill 
of  exchange  on  Greenleaf  at  sixty  days  from  date,  whereby  he  re- 
quested him  to  pay  to  his  (Gibson's)  order,  the  sum  of  $1800. 
Before  this  bill  became  due,  Gibson  indorsed  it  to  the  Hollister 


246  THE    OBLIGATION    SECURED 

Bank,  which  discounted  it  and  advanced  to  him  the  amount  thereof 
on  the  faith  of  said  bill  and  the  mortgage.  This  bill  was  also  pro- 
tested at  maturity,  and  no  part  thereof  has  been  paid. 

The  complaint  set  up  that  the  defendant  Williams,  among  others, 
claimed  some  interest  in  the  mortgaged  premises,  and  prayed  the 
usual  judgment  of  foreclosure  and  sale,  and  that  said  defendant, 
and  all  others  claiming  interests  therein  subsequent  to  that  of  the 
IloUister  Bank,  might  be  barred  and  foreclosed.  The  defendant 
Williams  set  up  and  proved  that,  on  the  29th  of  January,  1856, 
the  Sackett's  Harbor  Bank  (whose  name  was  subsequently  changed, 
by  an  act  of  the  legislature,  to  that  of  the  Reciprocity  Bank),  re- 
covered a  judgment  against  said  Gibson  to  the  amount  of  $2798.29; 
that  a  transcript  thereof  was  duly  docketed  in  the  Clerk's  office 
of  Erie  County  on  that  day;  that  said  Gibson  was  then  the  owner 
of  said  mortgaged  premises;  and  Williams  insisted, that  said  judg- 
ment was  a  lien  on  said  premises,  and  prior  to  that  of  the  mort- 
gage. Neither  of  said  bills  of  exchange  were  due  at  the  date  of 
the  recovery  of  said  judgment.  The  Superior  Court  of  Buffalo, 
at  special  term,  gave  judgment  in  favor  of  the  plaintiff,  and  de- 
clared said  mortgage  to  be  a  prior  Ken  to  said  judgment.  On  ap- 
peal, the  same  was  affirmed  at  general  term,  and  from  that  judg- 
ment the  defendant  Williams  appealed  to  this  court. 

Da  VIES,  J.^  There  can  be  no  doubt  that,  as  between  the  origi- 
nal parties  to  this  mortgage,  the  validity  of  it,  as  a  pledge  of  the 
mortgaged  premises  to  secure  the  amount  of  these  two  drafts, 
could  not  be  questioned.  It  was  clearly  the  intent  of  the  parties 
that  the  lands  described  should  stand  as  security  for  all  advances 
and  discounts  made  by  the  Holhster  Bank  to  Gibson.  If,  there- 
fore, there  were  no  legal  mortgage,  there  was,  undeniably,  an  equi- 
table one,  which  a  court  of  equity  would  enforce  against  the  original 
parties  to  it,  and  all  others  not  in  the  condition  of  bona  fide  pur- 
chasers or  subsequent  incumbrancers  without  notice.  The  ad- 
vances made  to  Gibson  were  before  the  recovery  of  the  Reciprocity 
Bank's  judgment.  As  soon  as  the  advances  were  made,  they  were 
embraced  in  and  secured  by  the  mortgage.  That  judgments  and 
mortgages  may  be  taken  to  secure  future  advances,  though  no  pres- 
ent indebtedness  was  subsisting  at  the  time  of  their  execution  or 
rendition,  has  long  been  well  settled  {Conrad  v.  The  Atlantic  Ins. 
Co.,  1  Peters,  386;  Leeds  v.  Cameron,  3  Sumn.  488;  Hubbard  v. 
Savage,  8  Conn.  215;  Walker  v.  Snediker,  1  Hoff.  Ch.  145;  Com. 
•  Portion  of  opinion  omitted. 


ROBINSON    V.    WILLIAMS  247 

Bank  v.  Cunningham,  24  Pick.  270;  Monell  v.  Smith  &  Jenkins, 
5  Cow.  441;  Lyle  v.  Duccomb,  5  Bin.  585;  4  Kent's  Com.  175; 
Lansing  v.  Woodworth,  1  Sand.  Ch.  43;  Barry  v.  Merchants'  Ex.  Co., 
1  id.  314;  United  States  v.  Hooe,  3  Cranch,  73;  Livingston  &  Tracy 
V.  Mclnlay,  16  Johns.  165;  Truscott  v.  iiTm^,  2  Sold.  147). 

It  is  pressed  upon  us  that  this  mortgage  is  invalid,  because  no 
sum  certain  is  mentioned  therein.  There  might  be  some  force  in 
the  argument  if  the  Reciprocity  Bank  stood  in  the  position  of  a 
subsequent  purchaser  or  incumbrancer  in  good  faith,  although  it 
will  be  attempted  to  be  shown  that  the  mortgage  would  be  good  as 
against  the  bank,  even  if  such  were  its  position.  That  question 
will  be  considered  hereafter. 

I  arrive,  therefore,  to  the  conclusion,  that  this  is  a  valid  mort- 
gage as  between  the  parties  to  it,  and  that  the  mortgagee  was  se- 
cured thereby  the  amount  of  the  advances  upon  the  two  drafts 
mentioned  in  the  complaint,  although  no  sum  certain  was  men- 
tioned on  the  face  of  the  mortgage.  These  advances  were  made 
prior  to  the  recovery  of  the  judgment  of  the  Reciprocity  Bank,  and 
prior,  therefore,  to  any  equities  of  that  bank.  It  follows,  there- 
fore, they  were  made  prior  to  any  notice  to  the  Hollister  Bank  of 
any  such  equities.  No  notice  could  be  given  of  that  which  had  not 
an  existence.  It  is  established  then,  it  is  submitted,  that,  at  the 
date  of  the  recovery  of  the  judgment  by  the  Reciprocity  Bank 
against  Gibson,  the  Hollister  Bank  had  a  good  legal,  and  certainly 
equitable,  mortgage  upon  the  premises,  to  secure  the  amount  of 
the  two  drafts  already  referred  to.  Was  that  judgment  a  prior 
lien  to  the  mortgage?  The  judgment  became  a  Hen,  at  the  time 
it  was  docketed,  upon  interest  of  the  defendant  therein  in  all 
lands  in  the  county  of  Erie  (2  R.  S.  359).  In  equity,  the  land  was 
undeniably  bound  to  pay  off  the  amount  of  these  two  drafts.  The 
law  is  well  settled,  that  the  equitable  mortgagee  is  entitled  to_a 
preference^over  subsequenfcJuHgment  creditors  (Matter  of  Howe, 
1  Paigeri29,  and  the  cases  there  cited;  Willard's  Eq.  Jur.  441, 
442;  Rockwell  v.  Hohhy,  2  Sand.  Ch.  9;  HilUard  on  Mort.,  Vol.  I,l 
451).  If  this  mortgage  is  to  be  regarded  simply  as  an  equitable  \ 
mortgage,  there  can  be  no  question  that,  in  accordance  with  well- 
settled  rules  of  law  and  a  uniform  current  of  decision,  it  is  a  valid 
security,  and  is  entitled  to  priority  over  the  subsequent  judgment 
of  the  Reciprocity  Bank. 

But,  I  think,  if  that  bank  had  been  a  purchaser  on  the  day  of 
the  recovering  of  its  judgment,  or  an  incumbrancer  by  way  of 
mortgage  for  money  then  advanced,  the  mortgage  of  the  Hollister 


248  THE    OBLIGATION    SECURED 

Bank  would  equally  have  been  entitled  to  priority.  The  record- 
ing of  the  mortgage  was  notice  that  the  Hollister  Bank  had  a 
mortgage  on  the  premises  for  the  purposes  therein  specified.  There 
was  enough  to  have  put  a  bona  fide  purchaser  or  incumbrancer 
upon  inquiry;  and  an  appHcation  to  the  Hollister  Bank  would  have 
disclosed  the  sum  certain  for  which  the  security  was  held.  As  was 
said  by  the  Supreme  Court  in  Monell  v.  Smith,  supra,  "we  may  be 
obliged  to  look  beyond  the  face  of  the  bond  to  see  what  is  due. 
In  a  technical  sense,  that  is  certain  which  may  be  made  certain." 
The  precise  sum  for  which  the  mortgage  was  held  as  security  might, 
at  any  time,  readily  and  with  certainty,  have  been  ascertained,  and 
a  bona  fide  purchaser  or  incumbrancer,  with  the  notice  which  the 
record  of  this  mortgage  furnished  him,  if  he  had  omitted  to  make 
the  inquiry  which  it  indicated,  could  hardly  have  claimed  to  have 
been  a  bona  fide  purchaser  or  incumbrancer.  The  authorities 
bearing  on  this  question  of  notice  are  fully  reviewed  in  the  case 
of  Williamson  v.  Brown,  15  N.  Y.  354,  and  the  result  of  them  stated 
as  follows:  "The  true  doctiine  on  this  subject  is,  that  where  a 
purchaser  has  knowledge  of  any  fact  sufficient  to  put  him  on  in- 
quiry as  to  the  existence  of  some  right  or  title  in  conflict  with  that 
he  is  about  to  purchase,  he  is  presumed  either  to  have  made  the 
inquiry  and  ascertained  the  extent  of  such  prior  right,  or  to  have  / 
been  guilty  of  a  degree  of  negligence  equally  fatal  to  his  claim  to/ 
be  considered  as  a  bona  fide  purchaser."  ^ 

In  any  aspect  in  which  this  case  may  be  regarded,  we  think  it 
free  from  doubt,  and  that  the  judgment  appealed  from  should  be 
affirmed,  with  costs. 

All  the  judges  concurring, 

Judgment  affirmed. 


YOUNGS  V.  WILSON 

Court  of  Appeals  of  New  York,  1863 

(27  N.  Y.  351) 

Appeal  from  the  Supreme  Court.    Action  to  foreclose  ajaorts 

^ager  — Iha^jEQ.mBlaijiLjse^orth-^^  a^ond,  execut ed  by  AlosesJ^ 

Eastman  to  George  Youngs  and  Abel_Hunt,  bearing  date  June  4,, 

1849,  in  the  penaTsum  of  two  thousand  four  hundred  dollars,  with 

a  condition  similar  to  that  of  the  mortgage  nextmentione^T'''^ 

It  also  set  forth  a  mortgage,  bearing  the  same  date  and^ between 


YOUNGS   r.    WILSON  249 

the  same  parties,  by  which  Eastman  conveyed  to  Youngs  and  Hunt 
.  ^prtai'n  lanrl^  in  y^,tas  (bounty,  whlch  Were  particularly  describe^ 
3^hich  p«4»vQyqnpp  ^p;a  n^adc  subject  to  the  following  condition, 
_viz.:  "That  if  the  said  Moses  W.  Eastman  sFaTI  well  and  duly  pT^y, 
and  save  harmless,  and  indemnify  the  said  George  Youngs  and 
A.bel  Hunt,  and  each  of  them,  of  and  from  all  liabilities  which  they, 
or  either  of  them,  may  have  at  any  time  heretofore  contracted  to 
and  for  the  said  Moses  E.  Eastman,  either  as  surety,  indorsers  or 
guarantors,  or  otherwise,  whether  now  due  or  yet  to  grow  due,  and 
shall  save  harmless  the  said  George  Youngs  and  Abel  Hunt,  and 
each  of  them,  of  and  from  all  damages,  costs  and  charges  on  ac- 
count of  the  same,"  then  the  conveyance  was  to  cease;  but  in  case 
"default  should  be  made  in  the  payment  of  all  or  any  part  of  the 
said  liabilities,  as  the  same  should  become  due,"  the  lands  were  to 
be  sold  and  the  amount  due,  with  costs  and  charges,  to  be  de- 
ducted from  the  proceeds,  and  the  surplus,  if  any,  paid  to  the  mort- 
gagor. 

The  complaint  also  stated,  that  the  mortgage  was  duly  recorded 
in  the  clerk's  office  of  Yates  County,  on  the  day  of  its  date;  that 
Youngs  had  paid  debts  of  Eastman,  on  which  he  was  liable  as 
surety  or  indorser,  at  the  time  when  the  mortgage  was  executed, 
which  amounted  to  $724.61  [of  which  a  particular  account  was 
given] ;  and  that  the  estate  of  Hunt  remained  liable  on  a  note  given 
by  Eastman  to  one  Owens,  on  the  24th  day  of  December,  1846,  for 
$263,  on  which  said  Hunt  was  indorser,  which,  with  interest,  still 
remained  unpaid;  that  the  mortgaged  premises  had  been  conveyed 
to  the  defendant,  James  Miles,  who,  with  the  other  defendants, 
claimed  some  interest  in  the  premises,  which  interest  had  accrued 
subsequent  to  the  lien  of  the  mortgage.  There  was  the  usual 
prayer  for  a  foreclosure,  and  a  sale  of  the  mortgaged  premises, 
and  payment  of  the  plaintiffs'  demands  and  costs  out  of  the  pro- 
ceeds. 

The  usual  judgment  of  foreclosure  for  the  sale  of  the  mort- 
gaged premises,  and  the  payment,  out  of  the  proceeds  of  the  sale, 
of  the  costs  and  expenses,  and  the  amounts  found  due  to  the  sev- 
eral plaintiffs,  was  entered  at  a  special  term;  from  which  judgment 
Lewis  O.  Wilson,  only,  appealed  to  the  Supreme  Court  at  general 
term.  On  the  hearing  of  that  appeal,  the  judgment  at  the  special 
term  was  reversed,  and  the  complaint  dismissed,  as  against  the 
appellant,  with  costs,  on  the  ground  that  the  mortgage  was  fraudu- 
lent and  void,  as  against  creditors  of  the  mortgagor,  for  uncer- 
tainty in  respect  to  the  debt  or  debts  it  was  intended  to  secure. 


250  THE    OBLIGATION    SECURED 

From  that  judgment  the  plaintiffs  brought  the  present  appeal. 
After  the  bringing  of  such  appeal  both  the  appellants  died,  and 
the  personal  representatives  of  the  appellant  Youngs  were  substi- 
tuted in  his  place.  There  had  been  no  substitution  as  to  the  execu- 
tors of  Abel  Hunt,  and  it  was  assumed,  on  the  argument,  that  as 
to  them  the  appeal  was  at  an  end. 

Selden,  J.  I  cannot  concur  with  the  court  below  in  the  opin- 
ion that  the  mortgage  in  question  was  void  as  against  creditors 
or  purchasers.  There  is  no  pretence,  and  could  be  none,  that  it 
was  not  vaUd  between  the  parties  to  it.  It  described  the  debts 
which  it  was  intended  to  secure,  with  such  certainty  that  there 
could  be  no  difficulty  in  determining  what  debts  were,  and  what 
were  not,  embraced  in  the  description.  In  such  cases,  the  maxim, 
that  that  is  certain  which  may  be  made  certain,  applies.  It  is 
not  requisite  that  the  condition  should  be  so  completely  certain  as 
to  preclude  the  necessity  of  extraneous  inquiry  (Monell  v.  Smith, 
5  Cow.  441;  Robinson  v.  Williams,  22  N.  Y.  380;  Stoughton  v. 
Pasco,  5  Conn.  442;  Merrills  v.  Swift,  18  id.  257;  United  States 
V.  Hooe,  3  Cranch,  73;  Kramer  v.  The  Farmers'  and  Mechanics' 
Bank,  15  Ohio,  253). 

The  mortgage  having  been  duly  recorded,  if  not  fraudulent  in 
fact,  was  as  effectual  against  subsequent  creditors  and  purchasers 
as  it  was  against  the  mortgagor.  If  it  was  sufficiently  certain 
to  be  valid  against  the  party  who  made  it,  it  was  equally  certain 
and  valid  against  all  persons  claiming  under  him.  If  vaUd  be- 
tween the  parties  it  was  a  mortgage,  and  as  it  was  duly  recorded, 
it  was  not  within  the  provision  of  the  statute  which  declares  void, 
as  against  subsequent  purchasers,  unrecorded  conveyances.  The 
only  statute  bearing  upon  the  question  is  the  following: 

"Every  conveyance  of  real  estate  within  this  State,  hereafter 
made,  shall  be  recorded  in  the  office  of  the  clerk  of  the  county 
where  such  real  estate  shall  be  situated;  and  every  such  convey- 
ance not  so  recorded  shall  be  void,  as  against  any  subsequent  pur- 
chaser in  good  faith  and  for  a  valuable  consideration  of  the  same 
real  estate,  or  any  portion  thereof,  whose  conveyance  shall  be  first 
duly  recorded."  I  can  discover  nothing  in  this  statute  to  justify 
the  distinction  between  certainty  as  against  the  party,  and  cer- 
tainty as  against  subsequent  creditors  or  purchasers,  which  forms 
the  basis  of  the  judgment  of  the  court  below.  If  the  instrument 
was  certain  enough  to  amount  to  a  conveyance,  it  was  a  recorded 
conveyance,  and  vaUd  as  such. 


YOUNGS    V.    WILSON  251 

A  purchaser,  with  notice  of  any  outstanding  equity  against  his 
vendor,  takes  the  place  of  such  vendor  and  acquires  his  rights 
only  (Frost  v.  Beekman,  1  Johns.  Ch.  301;  3  Sugden  on  "Vendors 
and  Purchasers,"  440);  and  notice  of  circumstances  sufficient  to 
put  a  party  upon  inquiry,  has  the  same  effect  as  actual  notice  of  the 
facts  which  could  be  learned  on  reasonable  inquiry  (3  Sugden,  468; 
Dunham  v.  Dey,  15  Johns.  569;  Peters  v.  Goodrich,  3  Conn.  150; 
Williamson  v.  Brown,  15  N.  Y.  359).  The  registry  of  the  mort- 
gage was  equivalent  to  actual  notice  of  its  existence  and  contents, 
and  the  purchaser,  with  such  notice,  is  bound  by  all  the  equities 
which  the  holder  of  the  mortgage  had  against  the  mortgagor,  whose 
place  he  takes  (Stoughton  v.  Pasco,  5  Conn.  442,  447).  The  con- 
dition of  the  purchaser  in  the  present  case  is  precisely  the  same 
as  it  would  have  been  at  common  law,  if  he  had  purchased  with 
actual  notice  of  the  prior  mortgage.  In  that  case  it  cannot  be 
doubted  that  he  would  have  taken  subject  to  the  mortgage,  if  it 
was  valid  against  the  mortgagor. 

The  rule  adopted  in  Connecticut,  in  Hart  v.  Chalker,  14  Conn. 
77,  on  which  the  court  below  placed  much  reliance,  is,  that  "where 
a  mortgage  is  given  to  secure  an  ascertained  debt,  the  amount  of 
the  debt  ought  to  be  stated."  I  am  not  disposed  to  question  the 
wisdom  of  this  rule,  although  it  would  sometimes  be  inconvenient 
and  do  injustice,  and  its  propriety  is  not  free  from  doubt  (see  5 
Conn.  449);  but  I  cannot  deduce  it  from  our  statute,  which  mereh' 
provides  that  conveyances  not  recorded  shall  be  void  against  pur- 
chasers. The  mortgage  of  Eastman  was  valid  between  the  par- 
ties; it  was  a  conveyance,  and  it  was  recorded,  and  therefore  was 
not  made  void  by  the  statute. 

It  is  only  with  reference  to  the  question  of  an  actual  intention 
to  defraud  creditors,  that  the  indefinite  description  of  the  debts 
intended  to  be  secured  by  the  mortgage  could  be  material.  What 
influence  such  indefiniteness  might  have  in  that  respect,  we  are  not 
called  upon  to  determine.  There  is  no  allegation  in  the  answer 
which  could  raise  that  question,  and  if  there  had  been,  we  could  not 
notice  it,  in  the  absence  of  any  finding  by  the  court  below  upon 
the  question  of  fact  {Grant  v.  Morse,  22  N.  Y.  324).  I  am,  there- 
fore, of  opinion  that  the  court  below  erred  in  declaring  the  mort- 
gage void,  as  against  Wilson. 

Upon  the  other  questions  presented  by  the  case,  so  far  as  they 
related  to  the  rights  of  George  Youngs  (and  to  that  extent  only 
are  they  now  before  the  court),  I  entertain  no  doubt  that  they  were 
correctly  decided  by  the  special  term.    The  judgment  of  the  gen- 


252  THE    OBLIGATION    SECURED 

eral  terra  should,  therefore,  be  reversed,  and  that  of  the  special 
term  affirmed,  as  to  the  relief  granted  by  that  judgment  to  George 
Youngs. 

There  are  no  appellants  here  representing  the  estate  of  Abel 
Hunt,  and  the  judgment  dismissing  the  complaint  as  against  the 
executors  of  that  estate,  will  not  be  affected  by  the  judgment  of 
this  court.  The  propriety  of  bringing  on  the  argument  of  the 
appeal,  without  the  presence  of  parties  representing  that  estate,  is 
very  questionable,  but  as  neither  of  the  parties  before  the  court 
interposed  any  objection  on  that  account,  the  defect  in  the  pro- 
ceedings, if  it  be  one,  has  not  been  regarded. 

Denio,  Ch.  J.,  Davies,  Wright,  Selden,  Emott  and  Balcom,  JJ., 
concurring, 

Judgment  accordingly.^ 


ACKERMAN  v.   HUNSICKER 
Court  of  Appeals  of  New  York,  1881 

(85  A^.  Y.  43) 

Appeal  from  order  of  the  General  Term  of  the  Supreme  Court, 
in  the  fourth  judicial  department,  made  April  6,  1880,  reserving 
a  judgment  in  favor  of  plaintiff,  entered  upon  the  report  of  a  ref- 
eree and  granting  a  new  trial.    (Reported  below,  21  Hun,  53.) 

This  action  was  brought  to  foreclose  a  mortgage  executed  by  the 
defendant  JLeva^.jIPQnJands  situate  iiTthe  city  of  Syracij,se.    Cer- 
tflin  of  the  defendants,  who  were  judgment  creditors  ofthe^morl-.^ 
gagor,  answered,  claiming  that  their  judgments  were  liens  superior  j 
to  thejoaortgage,  as  to  a  portion  ofthe  amount  claimed  by  plaintiff  _ 
to  be  secured  thereby. 

Andrews,  J.^  The  mortgage  from  Levi,  to  the  plaintiff,  was 
given  to  secure  the  mortgagee,  for  any  indorsements  he  had  made, 
or  should  thereafter  make,  for  the  mortgagor,  or  the  firm  of  Levi 
&  Miller,  to  the  amount  of  $6,000.  It  was  dated  May  2,  1874,  and 
was  recorded  May  3,  1874.  The  first  indorsement  was  made 
May  7,  1874,  and  the  last  October  16,  1874.  The  plaintiff  has  been 
compelled  to  pay  the  indorsed  paper,  and  has  advanced  for  that 
purpose  the  sum  of  nearly  $5,000,  over  and  above  all  payments 

*  Concurring  opinion   of   Marvin,  ^  Portion  of  opinion  omitted. 

J.,  omitted 


ACKERMAN    V.    HUNSICKER  253 

made  by  the  mortgagor.  This  action  is  brought  to  foreclose  the 
mortgage,  and  the  only  controversy  relates  to  the  priority  of  lien 
as  between  the  mortgagee  and  judgment  creditors  of  the  mort- 
gagor, whose  judgments  were  obtained  subsequent  to  the  mort- 
gage, but  prior  to  the  indorsement  by  the  plaintiff,  of  some  of  the 
notes,  which  enter  into  and  form  a  part  of  the  mortgage  debt. 

The  question  is  whether  the  mortgage  is  a  paramount  lien  to  the 
judgments,  as  to  that  part  of  the  mortgage  debt,  arising  out  of 
indorsements  made  after  the  judgments  were  docketed.  It  is  not 
claimed  that  the  plaintiff  had  actual  notice  of  the  judgments  when 
he  indoi-sed  the  paper,  and  it  is  found  by  the  referee  that  he  never 
had  personal  notice  or  knowledge,  or  any  notice  of  their  existence, 
until  after  all  the  indorsements  had  been  made.  The  judgments 
were  docketed  in  the  country  where  the  mortgaged  premises  were 
situated.  If  the  docketing  of  the  judgments  was  constructive 
notice  to  the  plaintiff  of  their  existence,  then  he  had  notice  of  the 
judgments;  otherwise  he  had  none. 

There  is  no  question  as  to  the  validity  of  mortgages  to  secure 
futm-e  advances  or  liabilities.  They  have  become  a  recognized 
form  of  security.  Their  frequent  use  has  grown  out  of  the  necessi- 
ties of  trade,  and  their  convenience  in  the  transactions  of  business. 
They  enable  parties  to  provide  for  continuous  dealings,  the  nature 
or  extent  of  which  may  not  be  known  or  anticipated  at  the  time, 
and  they  avoid  the  expense  and  inconvenience  of  executing  a  new 
security,  on  each  new  transaction.  It  is  well  known  that  such 
mortgages  are  constantly  taken  by  banks,  and  bankers,  as  security 
for  final  balances,  and  banking  facilities  are  extended,  and  daily 
credits  given,  in  reliance  upon  them.  Mortgages  for  future  ad- 
vances have  sometimes  been  regarded  with  jealousy,  but  their 
validity  is  now  fully  recognized  and  established.  {Bank  of  Utica 
V.  Finch,  3  Barb.  Ch.  294;  Truscott  v.  King,  6  N.  Y.  147;  Robinson  v. 
Williams,  22  id.  380;  Shirras  v.  Caig,  7  Cranch,  34;  Lawrence  v. 
Tucker,  23  How.  [U.  S.]  14;  Leeds  v.  Cameron,  3  Sumn.  492.) 

There  can  be  no  doubt,  therefore,  that  the  mortgage  in  this  case, 
as  between  the  parties  to  it,  is  a  valid  security  for  the  plaintiff's 
debt.  It  is  equally  clear  that  to  prefer  an  intervening  incumbrance 
over  the  claim  of  the  plaintiff,  would  violate  the  understanding 
of  the  parties  to  the  mortgage,  at  the  time  it  was  executed,  for  the 
plain  intention  was,  that  the  interest  of  the  mortgagor  in  the  land, 
as  it  existed  when  the  mortgage  was  given,  should  be  bound  as 
security  for  all  liabilities  which  the  plaintiff  might  incur  as  indorser, 
upon  the  faith  of  the  mortgage.    It  could  not  have  been  intended 


254  THE   OBLIGATION    SECURED 

that  the  plaintiff  should  be  deprived  of  any  part  of  the  security 
of  the  mortgage,  for  any  part  of  the  indorsed  paper.  It  would  have 
been  a  clear  breach  of  good  faith  on  the  part  of  the  mortgagor,  if 
he  had,  without  notice  to  the  mortgagee,  voluntarily  incumbered 
the  land  by  liens  having  priority  of  the  mortgage,  and  then  ap- 
plied to  the  plaintiff  for,  and  procured  further  indorsements. 

If  the  judgments  have  a  preference  over  the  plaintiff's  mort- 
gage, as  to  indorsements  made  after  the  judgments  were  docketed, 
it  must  result  from  some  superior  equity  of  the  judgment  creditors, 
or  from  the  effect  of  docketing  the  judgments,  as  constructive 
notice  to  the  plaintiffs  of  their  existence.  The  authorities  are  clear 
to  the  point,  that  upon  general  principles  of  equity,  no  such  pref- 
erence can  be  claimed.  It  must,  I  think,  be  conceded  that,  ac- 
cording to  general  principles  of  equity,  the  lien  of  the  plaintiff's 
mortgage  is  superior  to  the  lien  of  the  judgments,  as  well  for  in- 
dorsements made  prior  to  their  rendition,  as  for  those  subsequently 
made  without  notice. 

It  remains  to  consider  whether,  under  the  statutory  system  for 
the  registry  of  liens,  the  docketing  of  the  judgments  was  construc- 
tive notice  to  the  plaintiff.  If  the  docketing  of  the  judgments  was 
constructive  notice  to  him,  of  their  existence,  then,  unquestionably, 
the  judgments  have  preference  to  the  plaintiff's  mortgage  as  to  all 
advances  subsequently  made. 

The  general  principle  of  construction  of  the  registry  laws  upon 
the  point  of  notice,  is  that  the  registration  of  incumbrances  is 
notice  to  subsequent  incumbrancers  only.  They  are  prospective, 
and  not  retrospective,  in  their  operation.  {Stuyvesant  v.  Hall,  2 
Barb.  Ch.  151;  King  v.  McVickar,  3  Sandf.  Ch.  192;  Howard  Ins. 
Co.  V.  Halsey,  8  N.  Y.  271.)  The  plaintiff's  mortgage  was  first 
made,  and  first  recorded,  and  regarding  these  facts  only,  the 
/mortgage  was  the  prior  lien.  It  is  claimed,  however,  that  the  mort- 
gage did  not  become  an  actual  hen  or  incumbrance  until  the  in- 
dorsements were  made,  and  that  as  to  each  indorsement  it  became 
in  effect  a  new  mortgage,  as  of  the  time  when  such  indorsement 
was  made,  and  that  as  to  indorsements  made  subsequent  to  the 
docketing  of  the  judgments,  the  mortgage  must  be  deemed  a  sub- 
sequent lien.  It  is  manifestly  true  that  the  mortgage  did  not  be- 
come an  actual  charge  on  the  land,  so  as  to  be  enforceable  by  the 
plaintiff,  until  he  had  incurred  liabihty  as  indorser.  But  the  plain- 
tiff's mortgage  was  an  instrument  capable  of  being  recorded  under 
the  statute,  before  any  liability  had  been  incurred.  It  is  the  gen- 
eral practice  to  record  mortgages,  and  docket  judgments,  taken 


ACKERMAN    V.    HUNSICKER  255 

to  secure  future  advances  and  contemplated  liabilities,  before  an 
actual  indebtedness  arises.  On  being  recorded,  the  record  is  notice 
to  subsequent  purchasers  and  incumbrancers,  and  they  are  put 
upon  inquiry  and  have  the  means  of  ascertaining  to  what  extent 
advances  have  been  made,  and  by  notice,  to  prevent  further 
advances  to  their  prejudice. 

The  doctrine  that  a  party  who  takes  a  mortgage  to  secure  fur- 
ther optional  advances,  upon  recording  his  mortgage  is  protected 
against  intervening  liens,  for  advances  made  upon  the  faith  and 
within  the  limits  of  the  security,  until  he  has  notice  of  such  inter- 
vening lien,  and  that  the  recording  of  the  subsequent  lien  is  not 
constructive  notice  to  him,  has,  we  think,  been  generally  accepted 
as  the  law  of  the  State,  at  least  since  the  decision  in  Truscott  v. 
King,  6  N.  Y.  147.  It  would  not  be  wise,  under  the  circumstances, 
now  to  adopt  the  opposite  view,  even  though  we  should  regard  it 
as  better  supported  by  reason.  It  seems  to  us,  however,  that  the 
doctrine  which  we  have  affirmed  in  this  case  is  most  consistent 
with  equity,  and  establishes  a  rule  which  is  reasonable,  and  easy 
of  application.  The  opposite  rule  imposes  the  burden  of  notice 
and  vigilance  upon  the  wrong  person.  The  party  taking  the  sub- 
sequent security  may  protect  himself  by  notice,  and  as  is  said  by 
Mr.  Jarman  in  his  notes  to  Bytherwood's  Conveyancing:  "No 
person  ought  to  accept  a  security  subject  to  a  mortgage  authoriz- 
ing future  advances,  without  treating  it  as  an  actual  advancement 
to  that  extent." 

These  views  lead  to  a  reversal  of  the  order  of  the  General  Term 
and  an  affirmance  of  the  judgment  entered  upon  the  report  of  the 
referee. 

All  concur. 

Order  reversed  and  judgment  affirmed.^ 

1  The  cases  are  numerous:   Com-  Skinner,  35  111.  282  (18M);  Michigan 

mercial    Bank    v.    Cunningham,    24  Ins.    Co.    v.    Brown,    11    Mich.    266 

Pick.  270  (1837);  Goddard  v.  Sawyer,  (1863);  Madigan  v.  Mead,  31  Minn. 

9    Allen,    78    (1864);    McDaniels   v.  94    (1883);    Freiberg   v.    Magale,    70 

CoMn,  16  Vt.  300  (1844);  Collins  v.  Tex.  116  (1888). 
Carlile,  13  lU.  254  (1851);  Speer  v. 


256  THE    OBLIGATION   SECURED 

HYMAN  V.   HAUFF 

Court  of  Appeals  of  New  York,  1893 

(138  A^.  Y.  48) 

O'Brien,  J.  This  was  a  controversy  between  subsequent  lienors 
as  to  the  right  to  surplus  moneys  arising  upon  foreclosure  sale  in 
this  action.  Two  of  the  defendants  owned  seven  lots  in  the  city 
of  New  York,  upon  which  they  desired  to  construct  seven  dwellings. 
They  first  gave  a  mortgage  to  the  plaintiff  to  secure  the  payment 
of  money  advanced  or  to  be  advanced  dui-ing  the  progress  of  the 
work.  They  subsequently  made  contracts  with  various  parties 
for  materials  and  work  to  be  delivered  and  performed  in  the  future, 
as  specified  in  the  contracts,  and  executed  bonds  and  mortgages, 
absolute  on  their  face,  but  intended  by  the  parties  to  secure  the 
payment  of  the  moneys  stipulated  in  the  contracts.  The  mort- 
gages were  delivered  and  recorded  in  the  following  order:  The 
Lorillard  Brick  Works  Co.,  $6,000,  October  28,  1890,  recorded 
November  8,  1890;  The  Buffalo  Door  and  Sash  Co.,  $16,700, 
December  16,  1890,  recorded  December  22,  1890;  Cassidy  & 
Adler,  $7,500,  December  16,  1890,  recorded  December  23,  1890; 
Michael  McCormick,  $3,000,  December  19,  1890,  recorded  De- 
cember 27,  1890.  There  was  a  surplus  of  $27,687.76  upon  the 
sale  after  paying  the  plaintiff's  mortgage  and  the  costs.  The 
referee  appointed  to  report  upon  the  respective  claims  to  this 
surplus  made  full  findings  of  fact  and  law,  in  which  he  held 
that  distribution  should  be  made  as  follows:  (1)  The  expenses 
and  costs  of  the  proceedings;  (3)  the  receiver  of  the  Lorillard 
Co.  $6,000,  with  interest  from  October  5,  1891;  (3)  the  Buffalo 
Co.  $14,200,  with  interest  from  August  6,  1891;  (4)  Cassidy  & 
Adler  $7,500,  with  interest  from  June  19,  1890.  This  exhausted 
the  surplus  and  left  a  considerable  sum  upon  the  last-named  claim 
unpaid.  The  mortgage  of  McCormick,  the  payment  of  which  was 
postponed  for  the  other  claims,  which  were  preferred,  had  been 
assigned  to  James  Rogers,  who  insisted,  in  the  proceedings,  that 
his  claim,  though  subsequent  in  point  of  time,  was,  nevertheless, 
entitled  to  preference  over  the  Buffalo  Company  and  Cassidy 
&  Adler,  on  account  of  certain  equities  in  his  favor,  which  will  be 
hereafter  considered.  The  referee  decided  against  his  claim,  and 
the  court  confirmed  the  report  and  ordered  the  moneys  to  be  dis- 
tributed accordingly.    The  court  also  ordered  that  Rogers  pay  the 


HYMAN    V.    HAUFF  257 

sum  of  $503.62  to  Cassidy  &  Adler  to  reimburse  them  for  a  portion 
of  the  loss  sustained  by  them  in  the  depletion  of  the  fund,  by  the 
payment  of  costs  caused  by  his  unsuccessful  contention.  He  is  the 
only  party  who  has  appealed,  and  the  questions  are  raised  by  his 
exceptions  to  the  report.  It  is  only  necessary  to  state  generally 
the  attitude  of  the  appellant,  with  respect  to  the  claim  of  the  Buf- 
falo Company,  in  order  to  present  the  main  question  raised  by  his 
appeal.  That  mortgage  was  given  by  the  owners  to  secure  their 
payments,  as  stipulated  in  the  contract  between  them  and  the 
company,  for  furnishing  sash,  doors  and  other  trim  for  the  seven 
houses.  It  bound  the  owners  to  make  payments  in  cash  to  the 
company  in  different  sums,  at  different  times  in  the  future,  and  as 
the  materials  were  furnished.  It  was  agreed  that  if  the  owners 
should  fail  to  make  the  payments,  according  to  the  terms  of  the 
contract,  the  company  might,  at  its  option,  cease  to  deUver  ma- 
terials, and  thereupon  the  mortgage  should  become  due  to  the  ex- 
tent of  the  goods  delivered.  The  payments  were  not  made  as  pro- 
vided. The  instrument  also  contained  the  following  provision; 
"It  is  further  agreed  that  in  case  any  lien  or  incumbrance  of  any 
kind  shall  be  filed  or  docketed  against  or  placed  upon  the  said 
premises,  or  any  part  thereof,  during  the  performance  of  this 
contract,  the  parties  of  the  first  part  may,  at  their  option,  cease 
to  deliver  materials  hereunder,  and  unless  such  lien  or  incumbrance 
shall  be  discharged  of  record  within  ten  days,  the  said  bond  and 
mortgage  shall  thereupon  become  due  and  payable  to  the  extent 
of  the  materials  which  shall  then  have  been  delivered." 

There  were  liens  and  incumbrances  subsequently  placed  upon 
the  property  by  the  owners,  as  we  have  seen.  The  appellant  con- 
tends, upon  substantially  these  facts,  that  the  mortgage  was  to 
secure  future  advances  which  were  optional  merely,  and  that  as 
to  all  such  advances,  made  after  notice  of  his  mortgage,  he  has  the 
prior  lien.  If  he  is  right  in  this  position  sufficient  of  the  claims 
which  have  been  held  superior  to  his  would  be  postponed  to  enable 
him  to  realize  upon  his  debts.  The  doctrine  appHcable  to  mort- 
gages given  to  secure  voluntary  future  advances,  as  affected  by 
subsequent  liens,  has  been  discussed  in  England  and  seems  to  have 
been  settled  there  in  accordance  with  the  contention  of  the  appel- 
lant, though  not  without  controversy  and  strong  dissent.  {Gordon 
V,  Graham,  2  Eq.  Cas.  Abr.  598;  Hopkinson  v.  Roll,  9  H.  L.  514; 
London  &  C.  Bkg.  Co.  v.  Ratdiffe,  6  A  pp.  Cases,  H.  L.  722;  Brad- 
ford Bkg.  Co.  V.  Briggs,  12  id.  29.) 

These  cases  hold  that  the  lien  of  a  mortgage,  to  secure  voluntary 


258  THE    OBLIGATION    SECURED 

future  advances,  will  be  postponed,  as  to  such  advances  as  are- 
made  after  knowledge  of  the  existence  of  a  subsequent  mortgage, 
in  favor  of  the  holder  of  the  latter.  Substantially,  this  rule  seems 
to  have  been  followed  in  several  of  our  sister  states.  (Montgomery's 
Appeal,  36  Penn.  St.  170;  Spader  v.  Lawler,  17  Ohio,  371;  Ladue  v. 
Detroit,  13  Mich.  390;  Collins  v.  Carlile,  13  111.  254;  Boswell  v. 
Goodwin,  31  Conn.  74.) 

The  general  doctrine  as  announced  in  Hopkinson  v.  Roll  (supra), 
which  is  the  leading  case  in  England,^  has  been  referred  to  by  this 
court  with  approval,  though,  it  seems  to  me,  that  the  precise  ques- 
tion was  not  decided.  (Ackerman  v.  Hunsicker,  85  N.  Y.  43; 
Truscott  V.  King,  6  id.  147.) 

Without  attempting  to  discuss  the  equity  of  the  rule  or  to  point 
out  its  precise  limits  and  application  it  is  quite  clear  that  it  can 
operate  only  against  a  security  for  future  advances,  purely  and 
plainly  optional,  the  holder  of  which  has  actual  notice  of  a  subse- 
quent mortgage  for  an  existing  debt  or  liability.  The  mortgage 
which  the  appellant  holds  was  given  to  McCormick  to  secure  to 
him  the  payment  of  certain  sums  of  money  for  work  to  be  per- 
formed in  the  future  in  the  construction  of  the  houses.  It  is  not 
clear  from  the  record  that  the  contract  which  it  was  given  to  secure 
was  any  more  obligatory  upon  him  than  was  the  other  contract 
with  the  Buffalo  Company,  and  if  it  was  not,  then  the  appellant 
has  no  superior  equity  in  his  favor.  But  we  think  that  the  mort- 
gage to  the  Buffalo  Company  was  not  to  secure  future  optional 
advances  within  the  rule  referred  to.  At  its  inception  and  upon  its 
face,  both  parties  were  bound  to  perform  it,  at  the  peril  of  being 
subjected  to  damages.  True,  it  contains  a  provision  that  if  the 
owner  fails  to  make  his  payments  for  the  property  furnished,  as 
they  become  due,  then  the  other  party  is  absolved  from  the  ob- 
ligation to  make  further  performance.  But  that  is  the  case  with 
most  executory  contracts,  and' the  clause  expresses  nothing  more 
than  what  the  law  would  imply  ordinarily  upon  the  same  facts. 
The  other  provision  was  that  the  obligation  to  make  further  de- 
livery of  materials  should  cease  whenever  the  owner  permitted 

'  In  West  V.  Williams  [1898],  1  Ch.  varices;  and  in  Hopkinson  v.   Roll, 

Div.    488,    the    court,    commenting  the  mortgage  was  created  in  favor 

upon    the    Enghsh    decisions,    said:  of  bankers  and  to  secure  a  current 

"Neither  in  Hopkinson  v.  Roll,  nor  account.     It  seems  to  me  that,   if 

in  any  of  the  cases  which  have  fol-  once  you  introduce  the  element  or 

lowed  it,  has  there  been,  so  far  as  I  obligation  to  make  further  advances, 

am    aware,    any    obligation    on    the  the  authority  of  Hopkinson  v.  Roll 

first  mortgagee  to  make  further  ad-  is  inapplicable." 


HYMAN    V.    HAUFF  259 

any  subsequent  lien  or  incumbrance  to  be  filed.  These  provisions 
were  both  for  the  benefit  of  the  Buffalo  Company,  and  if  it  elected 
to  waive  them  and  go  on  and  complete  its  contract  according  to  its 
terms,  no  subsequent  mortgagee  has  any  right  to  question  the 
equity  of  its  claim  to  payment.  If  the  party  in  whose  favor  the 
stipulation  was  made  chooses  to  waive  it  a  stranger  to  the  contract 
cannot  complain  or  derive  any  advantage  or  raise  any  question 
based  upon  a  fact  that  in  no  way  concerned  him.  When  it  appears 
as  matter  of  law,  from  an  inspection  of  the  instrument,  that  the 
prior  mortgagee  may  decline  to  make  the  advances  at  his  pleasure,' 
without  taking  the  risk  of  subjecting  himself  to  damages  or  loss, 
the  rule  can  be  defended  upon  equitable  principles.  But  where 
the  obligation  to  advance  exists,  or  where  the  right  to  decline  de- 
pends upon  facts  dehors  the  instrument,  and  which  may  be  the 
subject  of  dispute  or  contention,  the  holder  of  the  first  security 
is  warranted  in  making  the  advances  in  reliance  upon  his  mort- 
gage. In  the  present  case  the  Buffalo  Company  had  no  right  to 
refuse  further  delivery  of  goods  unless  it  could  estabhsh  a  breach 
of  some  of  the  conditions  of  the  contract  upon  which  the  right  to 
refuse  depended.  This  it  could  not  do  by  a  mere  production  and 
inspection  of  the  writing,  but  would  be  obliged  to  resort  to  proof 
of  extraneous  facts  which  might  be  disputed,  and,  in  some  cases, 
it  is  quite  conceivable  that  a  party  might  fail  in  the  attempt  to 
estabhsh  them  to  the  satisfaction  of  a  court  or  jury.  It  would  be 
incorrect  in  law  and  unjust  in  practice  to  hold  that  goods,  delivered 
under  such  a  contract,  were  subject  to  the  rule  applicable  to  mere 
optional  advances.  Moreover  this  contract  may  have  been,  and, 
we  must  assume  was,  a  profitable  one  for  the  parties  who  agreed 
to  furnish  the  building  materials.  They  could  not  decline  to  go  on, 
when  the  subsequent  mortgage  was  given,  without  sacrificing 
profits  to  be  derived  from  a  full  performance.  The  company 
not  only  protected  itself  by  conditions  in  the  contract  for  its  own 
benefit,  but  by  mortgage  security.  It  was  entitled  to  all  the  fruits 
of  the  contract,  and,  though  the  other  party  did  not  perform  in  all 
respects,  the  company  could  waive  the  omission  and  still  go  on 
earning  these  fruits,  upon  the  faith  of  its  security.  To  hold  that, 
under  such  circumstances,  a  subsequent  mortgage  and  a  stranger 
could  arrest  the  performance  of  such  a  contract,  against  the  will 
of  the  immediate  parties,  would  be,  practically,  to  impair  its  obli- 
gations. All  the  cases  hold  that  the  principle  does  not  apply  when 
a  party  subjects  himself  to  damages  by  declining  to  perform  or  to 
make  the  advances,  and,  if  not,  why  should  it  apply  to  a  case 


260  THE    OBLIGATION   SECURED 

where  the  loss  of  the  profits  or  fruits  of  the  contract  mu-t  fallow 
a  failure  or  omission  to  perform.  In  many  cases  the  profits  which 
a  party  is  to  derive  from  full  performance  of  his  contract  are  much 
larger  than  any  damages  which  the  other  party  to  it  could  recover 
against  him  for  failure  to  perform. 

It  appears  that  the  appellant's  mortgage  was  upon  its  face  ex- 
pressly subject  to  all  prior  mortgages,  and,  further,  that  McCor- 
mick,  after  the  assignment  of  it  to  appellant  as  collateral  security, 
executed  an  instrument  to  the  Buffalo  Company  in  which  he  stip- 
ulated that,  irrespective  of  the  date  of  the  delivery  of  the  material, 
the  prior  mortgage  should  be  and  remain  the  superior  security. 
Of  course,  the  object  of  the  stipulation  was  to  avoid  the  very 
question  we  have  been  considering.  What  effect  it  had  and  how 
far,  if  at  all,  it  bound  the  appellant  and  what  significance  is  to  be 
attached  to  this  clause  in  the  mortgage,  expressly  subordinating 
it  to  all  mortgages  of  prior  date  and  record,  are  questions  of  interest 
ably  discussed  upon  t  he  briefs  of  counsel,  and  which  have  received  the 
attention  of  the  courts  below.  But  as  the  appellant's  claim  of  equi- 
table priority,  which,  so  far  as  he  is  concerned,  is  fundamental,  can- 
not be  sustained,  it  is  unnecessary  to  consider  the  other  questions. 

It  follows  that  the  order  appealed  from  must  be  affirmed,  with  costs. 

All  concur.  Order  affirmed} 

1  In  Scheurer  v.  Brown,  67  App.  lengthy  discussioil  of  the  general  doc- 
Div.  (N.  Y.)  567  (1902),  Hatch,  J.,  trine  applicable  to  mortgages  given 
said  (p.  572):  "A  mortgage  is  valid  to  secure  future  advances.  The  fol- 
which  is  given  to  secure  future  ad-  lowing  propositions,  however,  we 
vances  {Ackerman  v.  Hunsicker,  85  think,  are  settled  by  the  authorities: 
X.  Y.  43),  and  may,  under  certain  First.  Where    the   mortgagee   has 

circumstances,  be  good  as  against  a  bound  himself  to  make  advances  or 
junior  incumbrancer,  even  though  incur  liabilities,  such  advances,  when 
all  of  the  advances  have  not  been  in  made,  shall  relate  back,  and  the 
fact  made.  The  extent  to  which  it  mortgage  will  be  a  vahd  hen  for  ad- 
may  be  enforced,  for  advances  made  vances  made  or  liabihties  incurred, 
after  notice  of  a  junior  incumbrance,  against  subsequent  purchasers  or 
it  is  not  now  necessary  for  us  to  encumbrancers  with  notice,  actual 
decide,  and  we  expre.ss  no  opinion  or  constructive,  of  the  mortgage, 
thereon.     It  is  clear,  however,  that  Second.  Where  there  is  no  obliga- 

where  the  liabiUty  to  make  such  tion  on  the  mortgagee,  and  such 
advances  is  optional  with  the  mort-  advances  or  liabiUties  are  merely 
gagee,  he  -will  not  be  protected  in  optional  with  him,  and  he  has  actual 
making  them  after  notice  of  the  notice  of  a  subsequent  encumbrance 
existence  of  the  junior  incumbrance.  or  conveyance  of  the  mortgaged 
(Hyman  v.  Hauff,  138  N.  Y.  48)."  premises,  before  making  advances  or 

In  Brinkmeyer  v.  Browneller,  55  incurring  liabilities,  his  lien  is  not 
Ind.  487  (1876),  Worden,  C.  J.,  said:  good,  as  against  the  subsequent  pur- 
"We    shall    not    enter    upon    any      chaser  or  encumbrancer." 


BOOK  III 

NATURE   AND   INCIDENTS   OF   THE   MORTGAGE 
RELATION 


CHAPTER   I 

COMMON  LAW  RELATIONS 

Section  I, — Title 

NOYS  V.   MORDANT 

High  Court  of  Chancery,  1706 

(Finch,  Pre.  Ch.  265) 

A.,  being  in  possession  of  an  estate  that  was  a  mortgage  in  fee, 
by  will  devises  it  to  his  daughters  B.  and  C.  and  their  heirs,  and 
dies;  B.  marries  and  dies;  the  question  was,  Whether  the  share  of 
B.  should  be  decreed  real  or  personal  estate,  and  consequently  go 
to  her  heir,  or  to  her  husband  as  her  administrator? 

My  Lord  Keeper  decreed  it  against  the  husband,  and  put  this 
case:  A  man  seised  of  lands  in  fee,  which  were  only  mortgaged  to 
him,  devises  them  to  his  son  and  heir,  and  his  heirs;  surely  these 
lands  shall  descend  as  an  inheritance;  or,  though  the  mortgage  be 
paid  off,  shall  not  the  money  be  considered  as  lands,  and  go  to  the 
heir,  and  his  heirs,  as  the  lands  would  have  done,  and  this  purely 
by  the  intention  of  the  testator?  And  did  not  the  testator,  who 
hatl  a  governing  power,  intend,  in  the  present  case,  Ihat  the  mort- 
gaged lands  should  be  considered  as  any  other  lands  of  inheritance, 
and  be  subject  to,  and  directed  by,  the  same  rules  that  other  estates 
are?  ^ 

'  "And  in  this  case  it  was  declared  is  this  special  custom,  that  lands  in 

by  the  Lord  Chancellor  [Nottingham]  mortgage   are  always   reckoned   the 

that  always  when  a  mortgagee  dies  personal  estate  of  the  mortgagee,  he 

and  makes  no  devise  of  the  lands  being  a  citizen." — Win?}  v.  Littleton, 

he  has  in  mortgage,  they  shall  go  to  1  Vern.  3  (1681).     And  see,  Fisk  v. 

the  executor.     And  in  London  there  Fisk,  Finch,  Pre.  Ch.  11  (IfiOO). 

261 


COMMON    LAW   RELATIONS 


BURDEN   V.   KENNEDY 


High  Court  of  Chancery,  1757 
(3  Atk.  739) 

Lord  Chancellor  [Hardwicke].  Where  an  execution  by  elegit 
or  fieri  facias  is  lodged  in  a  sheriff's  hands,  it  binds  goods  from 

at  time,  except  in  the  case  of  the  crown,  and  a  leasehold  estate 
is  also  affected  from  that  time;  and  if  the  debtor  subsequent  to  this 
makes  an  assignment  of  the  leasehold  estate,  the  judgment  creditor 
need  not  bring  a  suit  in  ejectment,  to  come  at  the  leasehold  estate, 
by  setting  aside  the  assignment,  but  may  proceed  at  law  to  sell  the 
term,  and  the  vendee,  who  is  generally  a  friend  of  the  plaintiff,  will 
be  entitled  at  law  to  the  possession,  notwithstanding  such  assign- 
ment. 

But  in  the  present  case  here  is  only  an  equity  of  redemption  in 
the  debtor  in  the  leasehold  estate,  and  an  execution  lodged  will  not 
affect  this,  as  the  legal  estate  is  in  the  mortgagee:  and  consequently, 
by  the  common  equity  of  this  court,  he  may  come  here  to  redeem 
a  subsequent  incumbrancer,  and  likewise  to  discover  whether  there 
was  any  and  what  consideration  for  the  assignment.^ 


1  In  Williarns  v.  Williams,  270  111. 
552  (1915),  Justice  Cooke  said  at 
pages  55.5-6: 

"It  is  true,  as  plaintiffs  in  error 
contend,  that  in  the  case  of  a  com- 
mon law  mortgage  the  mortgagor  is 
the  legal  owner  of  the  mortgaged 
])roperty  as  against  all  persons  ex- 
cept the  mortgagee  or  his  assigns. 
(City  of  Chicago  v.  Sullivan  Machinery 
Co.,  269  in.  58.)  The  mortgagor's 
interest  in  the  land  may  be  sold 
under  execution;  his  widow  is  en- 
titled to  dower  in  it;  it  passes  as  real 
estate  by  devise;  it  descends  to  his 
heirs  as  real  estate  upon  his  death, 
intestate;  he  may  maintain  an  action 


for  the  land  against  a  stranger  and 
the  mortgage  cannot  be  set  up  as  a 
defense.  On  the  other  hand,  the 
mortgagee  has  no  such  estate  as  can 
be  .sold  under  execution;  his  widow 
has  no  right  to  dower  in  it;  upon  his 
death  the  mortgage  passes  to  his 
personal  representative  as  personal 
estate  and  passes  by  his  will  as  per- 
sonal property.  The  mortgagor  may 
convey  his  title  or  mortgage  it  ta 
successive  mortgagees,  and  his  gran- 
tee or  mortgagee  will  .succeed  to  his. 
estate  and  occupy  his  position,  sub- 
ject to  the  incumbrance.  {Lightcap 
W.Bradley,  186  lU.  510.)" 


MCMURPHY    V.    MINOT  263 

McMURPHY  V.   MINOT 

Supreme  Judicial  Court  of  New  Hampshire,  1827 

(4  N.  H.  251) 

This  was  an  action  of  covenant  broken,  on  an  indenture  made  the 
12th  July,  1811,  by  which  the  plaintiff  demised  to  Seth  Daniels 
a  certain  tract  of  land  to  hold  during  her  natural  life,  and  the  said 
Daniels  covenanted  with  the  plaintiff  to  pay  her,  on  the  first  day  of 
May,  annually,  a  rent  of  S30.  The  action  was  brought  against  the 
defendant,  as  assignee  of  Daniels,  for  the  said  rent  from  1st  May, 
1817,  to  1st  May,  1825,  and  was  submitted  to  the  decision  of  the 
court  upon  the  following  statement  of  facts : 

The  indenture  was  made  as  stated  in  the  declaration  and  Daniels, 
having  entered  under  it,  afterwards  conveyed  all  his  estate  to  one 
Gilman  Dudley,  who,  on  the  3d  April,  1822,  conveyed  the  land  to 
the  defendant  in  fee  and  in  mortgage.  Dudley  remained  in  posses- 
sion and  took  the  profits  until  his  death  in  October,  1822,  and  after 
his  decease  his  administratrix  remained  in  possession,  taking  the 
profits  until  April,  1824.  On  the  16th  April,  1824,  a  tenant  en- 
tered upon  part  of  the  land  under  an  agreement  with  the  defendant 
to  pay  rent  to  him  in  case  the  land  was  not  redeemed.  On  the  23d 
April,  1825,  the  administratrix  of  Gilman  Dudley  conveyed  to  the 
defendant  the  right  in  equity  to  redeem  the  land  mortgaged  as 
aforesaid,  and  the  defendant's  said  tenant  has  been  in  possession  of 
the  whole  tract  from  that  time  to  the  commencement  of  this  action 
on  the  22d  March,  1826.  All  the  interest  which  the  plaintiff  ever 
had  in  the  land  was  an  estate  for  her  own  life,  and  the  reversion 
was  in  Daniels. 

Richardson,  C.  J.  It  has  been  urged  in  behalf  of  the  defendant 
in  this  case  that  the  plaintiff  is  not  entitled  to  recover  anything, 
because  the  rent  was  never  demanded  of  Minot.  The  law  on  this 
point  is  well  settled.  When  a  lessor  proceeds  for  a  forfeiture  or  to  | 
enforce  a  penalty  he  must  show  a  demand  of  a  rent  on  the  very  day  I 
it  was  payable.  But  in  an  action  of  covenant  no  demand  is  neces- 
sary (Remson  v.  Conklin,  18  Johns.  447;  Com.  Dig.  Rent.,  D.  4; 
Coon  V.  Brickett,  2  N.  H.  Rep.  163).  We  are  therefore  of  opinion 
that  this  objection  to  the  action  cannot  prevail. 

It  has  also  been  urged  that  this  action  cannot  be  maintained, 
because  the  particular  estate  and  the  reversion  having  become 


264  COMMON    LAW    RELATIONS 

united  in  the  same  person  the  particular  estate  is  merged  and  the 
rent  exlinguished.  Had  the  rent  in  this  case  been  incident  to  the 
reversion,  it  is  clear  that  this  action  could  not  be  maintained 
{York  V.  Jones,  2  N.  H.  Rep.  454).  But  it  is  well  settled  that  the 
rent  is  not  inseparably  incident  to  a  reversion  (Co.  Lit.  143  and 
47a;  2  Bl.  Cora.  176).  Rent  may  be  reserved  upon  a  grant  of  a 
man's  whole  estate,  in  which  case  there  can  be  no  reversion.  The 
case  of  Webb  v.  Russell,  7  D.  &  E.  .393,  which  has  been  cited  by  the 
defendants'  counsel  does  [not]  apply  in  this  case.  It  was  there 
held  where  rent  is  incident  to  a  particular  reversion,  when  that  par- 
ticular reversion  is  merged,  the  rent  is  extinguished.  But  in  this 
case  the  rent  was  never  incident  to  the  reversion.  The  plaintiff 
granted  her  whole  estate,  reserving  a  rent,  and  she  had  no  reversion 
to  which  it  could  be  incident.  In  order  to  maintain  this  ground  it 
must  be  shown  that  when  he  who  has  a  reversion  takes  a  lease  of 
the  particular  estate  and  covenants  to  pay  rent,  such  rent  is 
extinguished  by  the  union  of  the  particular  estate  and  the  reversion. 
But  this  proposition  cannot  be  sustained  by  any  reason  or  author- 
ity, and  we  are  of  opinion  that  this  ground  of  defence  fails 
altogether. 

But  it  is  further  contended  on  the  part  of  the  defendant  that 
being  only  a  mortgagee  he  cannot  in  any  event  be  held  liable  for 
the  rent  until  he  took  possession  under  the  mortgage,  and  the  case 
of  Eaton  v.  Jaques,  Doug.  438,  is  cited  as  an  authority.  But  that 
decision  has  been  long  questioned  (7  D.  &  E.  312),  and  in  1819  the 
question  came  before  all  the  judges. of  England,  and  a  great  major-^ 
ity  were  of  opinion  that  when  a  party  takes  an  assignment  of  a 
lease  by  way  of  mortgage  as  a  security  for  money  lent,  the  whole 
interest  passes  to  him  and  he  becomes  liable  on  the  covenant  for  the 
payment  of  rent,  though  he  has  never  occupied  or  become  possessed 
in  fact  {Williams  v.  Bosanquet  et  at.,  1  Brod.  &  Bing.  72),  / 

I    In  this  State  it  has  been  repeatedly  decided  that  a  mortgage  in 
free  vests  in  the  mortgagee  the  whole  legal  estate;  the  necessary 
/consequence  of  which  seems  to  be  that  such  a  mortgagee  must  be 
[liable  for  the  performance  of  covenants  running  with  the  land. 
I  And  we  think  in  this  case  the  defendant  is  liable  for  any  rent  that 
/  became  due  after  his  mortgage  was  executed. 

In  considering  this  case,  the  question  occurred  to  us  whether  the 
liability  of  the  defendant  could  be  affected  by  the  circumstance, 
that  the  rent  was  reserved  upon  a  grant  of  the  freehold,  while  the 
conveyance  to  him  was  in  fee.  But  we  find  that  it  has  been  decided 
that  covenant  will  lie  against  the  assignee  of  part  of  an  estate  for 


ASTOR    V.    HOYT  265 

not  repairing  his  part,  for  it  is  divisible  and  follows  the  land 
{Congham  v.  King,  2  East,  580;  Cro.  Car.  222).  And  we  are  not 
able  to  discover  an^^  reason  why  he  who  takes  a  larger  estate  should 
not  be  bound  bj'^  a  covenant  running  with  a  less  estate  which  is 
parcel  of  a  larger. 

On  behalf  of  the  plaintiff  it  has  been  argued  that  the  defendant 
is  liable  in  this  action,  not  only  for  the  rent  which  has  become  due 
since  he  became  owner  of  the  land,  but  the  rent  which  became  due 
before  that  time.  The  cases  which  have  been  cited  by  the  defend- 
ant's counsel  seem  to  show  that  the  law  is  not  so.  It  is  another 
argument  in  favor  of  the  defendant,  that  when  the  action  is  against 
an  assignee,  it  is  usual  to  allege  in  assigning  the  breach  of  the  cove- 
nant, that  the  breach  happened  after  the  assignment  (2  Chit- 
ty's  PI.  191 ;  Lilly,  134;  Dubois  v.  Van  Orden,  6  Johns.  105;  Carthew, 
177;  2  Ventris,  231).  It  is  said  in  Woodfall,  274  and  338,  that  an 
assignee  is  liable  for  arrearages  of  rent  incurred  before,  as  well  as 
during  his  enjojanent;  but  he  cites  no  case  in  which  it  has  been 
so  decided,  and  offers  no  argument  in  support  of  the  propositions, 
and  we  are  of  opinion  that  this  is  not  law,  and  there  must  be  judg- 
ment for  the  plaintiff  for  the  rent  which  has  become  due  since  the 
3d  of  April,  1822. 

Judgment  for  the  'plaintiff} 


AsTOR  V.  HoYT,  5  Wend.  603  (1830).  Suit  in  chancery  by  the 
landlord  of  premises  in  the  City  of  New  York  to  establish  his  claim 
to  certain  monies  awarded  to  the  tenant  (Madden)  as  compensation 
for  opening  streets  through  the  premises  demised.  Madden  had 
mortgaged  his  term  to  Ho3^t,  who  thus  acquired  a  prior  claim  to 
the  fund  in  question.  Madden  having  covenanted  in  the  lease  to 
pay  all  assessments,  the  plaintiff  seeks  to  charge  the  liability  for 
the  breach  on  the  mortgagee.  The  Chancellor  (Walworth)  having 
ordered  the  payment  of  the  fund  in  court  to  the  defendant,  an 
appeal  was  taken  by  the  plaintiff  to  the  Court  for  the  Correction  of 
Errors.  On  the  point  under  consideration  the  following  opinion 
was  rendered  (page  613). 

Savage,  Ch.  J.  The  question  then  arises,  which  was  principally 
discussed  upon  the  argument,  is  the  mortgagee  to  be  considered,  the 

»  Farmers'  Bank  v.  Mutual  Assur.       accord.     See  also,  Calvert  v.  Bradley, 
Sac,  4  Lehigh  (Va.),  69  (1832) ;  May-       16  How.  (U.  S.)  580  (1853). 
hew  V.  Hardesty,  8  Md.  479  (1855), 


266  COMMON   LAW   RELATIONS 

assignee  of  the  leasehold  premises?  And  if  so,  is  he  liable  to  pay- 
ment of  the  damages  for  the  breach  of  Madden's  covenant?  That 
the  covenant  to  pay  all  assessments  is  a  covenant  running  with  the 
land,  there  can  be  no  doulit  (5  Co.  25);  and  that  the  assignee  is 
liable  for  the  breach  of  such  a  covenant  occurring  while  he  is 
assignee,  is  equally  clear;  but  whether  the  mortgagee  is  assignee, 
and  if  assignee,  whether  he  is  liable  for  breaches  of  the  covenant 
before  the  assignment,  are  questions  to  be  discussed.  In  Englaijid[^ 
I  think  it  must  be  conceded  to  be  settled  that  where  the  mortgagOL. 
Uyjht^  fnvjn  nf  t,^^  instriiment.  nnnvpys  nr  assifrns  by  way  of  mort- 

gage  his  whole  estate,  the  mortgagee  is  considered,  at  law  and  in 
equitv  too_.the . assignee.  We  read,  indeed,  m  some  of  the  books 
that  though  the  mortgage  purports  to  convey  an  estate  defeasible 
by  matter  subsequent,  yet  that  the  courts  of  equity  consider  them, 
in  their  true  intent,  as  mere  securities  for  money;  but  the  decision 
of  the  courts,  both  of  law  and  equity,  which  are  the  highest  evidence 
of  what  the  law  is,  have  generally  considered  mortgages  as  convey- 
ances; and  by  the  mode  of  drawing  them  there  it  seems  necessary 
that  when  the  condition  is  performed  there  should  be  a  reconvey- 
ance or  reassignment.  In  Sparks  v.  Smith,  2  Vernon,  275,  the 
court  refused  to  compel  a  mortgagee  to  disclose  whether  a  lease  was 
assigned  to  him  to  enable  the  plaintiff  to  prosecute  him  as  assignee 
upon  the  covenant  of  the  lessee,  who  was  also  mortgagor,  clearly 
implying  that  as  assignee  of  the  whole  term,  even  by  way  of  mort- 
gage, he  would  be  Uable;  and  in  Pilkington  v.  Shaller,  2  Vern.  374, 
where  a  recovery  had  been  had  in  a  similar  case  against  the  plain- 
tiff as  assignee,  the  court  refused  to  reheve  him,  saying  the  mort- 
gagee was  ill  advised  to  take  an  assignment  of  the  whole  term.  In 
the  case  of  Eaton  v.  Jaques,  Doug.  460,  the  Court  of  King's  Bench 
disregarded  these  cases  and  thought  them  not  well  considered. 
Lord  Mansfield  was  of  opmion  that  upon  principle  the  assignee  is 
liable  only  in  respect  of  the  possession,  and  that  as  a  mortgage  was 
a  mere  security,  the  mortgagee  out  of  possession  was  not  Hable  as 
assignee.  About  ten  years  afterwards  Lord  Thurlow  entertained  a 
different  opinion,  and  did  what  was  refused  in  Pilkington  v.  Shaller. 
He  compelled  a  person  who  had  received  a  lease  in  deposit  as  se- 
•curity,  to  take  an  assignment,  that  he  might  be  prosecuted  as 
assignee  upon  the  covenant  of  the  lessee  to  build  a  house.  The 
question  seems  to  have  been  finally  and  dehberately  settled  in 
Williams  v.  Bosanquet,  1  Brod.  &  Bing.  72,  by  ten  judges,  over- 
ruling the  doctrine  of  Lord  Mansfield  in  Eaton  v.  Jaques.  Dallas, 
Ch.  J.,  in  giving  the  decision  of  the  court,  states  expUcitly  the 


ASTOR    V.    HOYT  267 

grounds  of  the  decision.  He  shows  from  authority  that  the  lessee 
is  liable  for  the  rent,  whether  he  enter  or  not ;  he  is  liable  by  virtue 
of  his  lease,  and  he  argues  that  the  assignee  is  under  the  same  liabil- 
ity, whether  he  takes  an  absolute  assignment  or  only  by  way  of 
security,  for  the  lessee  conveys  by  the  assignment  his  whole  in- 
terest, which  the  assignee  takes;  and  as  the  lessee  was  liable  l)efore 
the  entry,  so  must  the  assignee  be  Hable  in  like  manner.  In  that 
case,  he  remarks,  the  assignment  was  of  all  the  right,  title  and  in- 
terest of  the  assignor,  and  so  completely  did  the  interest  pass  that 
there  was  a  covenant  to  reassign  upon  payment  of  the  money. 
The  money  was  not  paid  before  the  day  when,  if  not  paid,  the  as- 
signment was  to  become  absolute,  so  that  the  case  was  that  of  an 
absolute  assignment.  He  also  held  there  was  a  privity  of  estate, 
for  the  acceptance  of  the  assignment  was  equal  to  actual  entry, 
and  privity  of  contract,  because  contract  was  with  the  lessee  and 
his  assigns,  and  the  defendants  were  such  assigns;  therefore  the 
contract  was  between  the  lessor  and  assignee. 

Chancellor  Walworth  considers  the  case  of  Williams  v.  Bosan- 
■quet  as  settling  the  principle  in  England  that  a  mortgagee  of  lease- 
hold premises,  whether  in  possession  or  not,  is  liable  upon  the 
covenants  as  assignee,  but  he  thinks  such  a  principle  cannot  pre- 
vail in  this  State,  because  we  hold  the  mortgagor  to  be  the  true 
owner,  and  the  mortgagee  as  having  nothing  but  a  chattel  interest 
while  out  of  possession.  The  counsel  for  the  appellant  insists, 
however,  that  in  that  respect  there  is  no  difference  in  the  doctrine 
held  in  England  and  here,  for  Lord  Mansfield  said  in  The  King  v. 
St.  Michaels,  Doug.  632,  it  was  an  affront  to  common  sense  to  say 
the  mortgagor  is  not  the  real  owner.  Such  was  indeed  the  doctrine 
of  Lord  Mansfield  and  of  Duller,  Justice,  but  that  is  the  very 
doctrine  that  is  repudiated  in  Williams  v.  Bosanquet.  Lord  Mans- 
field asserts  that  the  mortgagor  is  the  real  owner.  Not  so,  says 
Ch.  J.  Dallas,  giving  the  opinion  of  the  ten  judges;  the  whole  in- 
terest is  assigned;  it  vests  absolutely,  and  is  not  the  less  absolute 
because  the  assignor  (the  mortgagor)  may  entitle  himself  to  a  re- 
assignment. Unless,  therefore,  a  man  can  be  the  real  owner  after 
he  has  parted  with  all  his  interest,  the  chancellor  must  be  right  in 
saying  that  the  English  doctrine  of  the  ten  judges  is  inapphcable 
here.  If  the  law  is  the  same  here  as  in  England,  and  the  law  there 
is  that  the  mortgagee  out  of  possession  has  the  whole  estate,  then 
this  court  was  in  error  in  the  case  of  Waters  v.  Stewart,  1  Caines' 
Cas.  in  Err.  47,  where  they  decided  that  the  equity  of  redemption 
remaining  in  the  mortgagor  was  real  estate,  and  hable  to  be  sold 


268  COMMON    LAW   RELATIONS 

on  execution;  and  the  Supreme  Court  were  equally  in  error  when 
they  decided  that  the  mortgagee  out  of  possession  had  no  interest 
which  could  be  sold  on  execution  (Jackson  v.  Willard,  4  Johns.  R. 
41),  for  if  he  had  the  whole  estate  it  certainly  might  be  sold.  It 
would  seem,  too,  that  Powell  must  have  been  under  a  great  mistake 
when  he  stated  that  the  mortgagor  might  levy  a  fine  or  suffei-  a 
common  recovery;  that  he  had  an  estate  which  descended  to  his 
heirs,  and  which  he  might  devise  by  his  will  (Powell  on  Mortgages, 
75,  76,  170). 

Here,  however,  the  mortgagor  is  the  owner  against  all  the  world, 
>;iihiPf-t  nnl^  to  the  lien  of  the  mortgage.  In  Mclnhjre  v.  Scott, 
8  Johns.  R.  159,  it  was  held  that  the  nibrtgagee  of  a  ship,  out  of 
possession,  was  not  liable  for  supplies;  and  in  Runyan  v.  Merserean, 
11  Johns.  R.  538,  the  assignee  of  the  mortgagor  was  permitted 
to  maintain  trespass  against  the  mortgagee  after  condition  broken. 
The  court  conclude  their  opinion  in  that  case  by  saying:  "The 
light  in  which  mortgages  have  been  considered  in  order  to  be  con- 
sistent necessarily  leads  to  the  conclusion  that  the  freehold  must  be 
considered  in  the  plaintifif,  and  he  of  course  is  entitled  to  judgment." 
In  that  case  the  court  rely  on  the  doctrines  of  Lord  Mansfield  in 
Eaton  V.  Jaques,  and  to  show  that  the  interest  of  the  mortgagee 
is  only  a  chattel  interest,  they  refer  to  the  well-established  princi- 
ples that  mortgages  pass  by  a  will  not  made  with  the  solemnities  of 
the  statute,  and  that  the  assignment  of  the  debt  draws  the  land 
after  it.  In  Coles  v.  Coles,  15  Johns.  R.  320,  Spencer,  J.,  repeats 
the  doctrine  of  Runyanv.  Mersereau,  and  in  that  case  it  was  decided 
that  the  wife  might  be  endowed  out  of  equity  of  redemption.  In 
Hitchcock  V.  Harrington,  6  Johns.  R.  295,  Kent,  Ch.  J.,  says  of  the 
mortgage :  "We  now  regard  the  mortgage  estate  only  for  the  benefit 
of  the  mortgagee  and  his  assigns.  As  to  the  rest  of  the  world,  as 
long  as  it  is  not  put  in  force,  it  is  only  a  pledge  or  lien  on  the  bond, 
with  which  they  have  no  concern  any  further  than  not  to  disturb 
it."  And  in  Dickinson  v.  Jackson,  6  Cowen,  147,  we  held  that  until 
default  in  payment  of  the  money  due  by  the  mortgage,  or  some  part 
thereof,  and  the  termination  of  a  notice  to  quit,  the  mortgagee  has 
no  right  of  entry  as  against  the  mortgagor  and  cannot  bring  eject- 
ment against  him,  though  he  may  against  the  assignee  of  the 
mortgagor,  the  tenancy  being  broken  by  the  assignment.  It  is  too 
late  for  us  now -to  retrace  our  steps  and  adopt  the  doctrine  oi  Wil- 
liams V.  Bosanquet,  even  if  it  was  correct.  To  recover  against 
an  assignee  of  the  lessee  it  must  be  averred  and  proved  that  all  the 
right,  title  and  interest  of  the  lessee  passed  by  assignment  to  the 


^ 


EATON    V.    WHITING 


269 


assignee.  After  these  decisions,  can  we  say  that  all  the  right,  title 
and  interest  of  the  mortgagor  has  passed  to  the  mortgagee  out  of 
possession?  So  far  from  it,  we  hold  that  the  mortgagee,  before 
foreclosure  or  the  commencement  of  proceedings  to  foreclose,  has 
but  a  chattel  interest.  It  is  perfectly  clear,  therefore,  that  a  mort- 
gagee of  a  term  out  of  possession  is  not  in  this  State  to  be  considered 
the  assignee.  In  Englaod  there -mu!»t  bo  a  rooonvc^'anoo^QiuIfiaS^ 
sie^nment;  so  sav  t*^^  ^^^^r^  '""  T^v/Z'^^.s-  v.  RnmnQuet.  Here  that 
is  not  necessary;  the  transfer  of  the  debt  transfers  the  mortgage; 
payment  extinguishes  the  lien,  J^nH  so  f|nes  a  tender.    iJut  \i  a  mort- 

"gagee  takes  possession  of  the  mortgaged  premises  lawfully,  he  must 
be  then  considered  assignee^,"^  ^^p  p|,^signee  must  taketheestate, 

"mm  fYnpTf..  Vy'lien  fhe  mortgagee  takes  possession,  ne  then  has  all_ 
jbhe  right, Jitjeand  interest  of  the  mortgagor:  then  he  acq"mres^nd~ 
the  mortgagor  loses  an  estate  Hable  to  be  sold  on  execution.    Hejs 

"therefore  su bs^t u ted  in  the  place  of  the  mortgagor,  who  was  losseg^ 
and  Ihei'yforels  assignee  and  liable  as  suck 

^  ITTarircorrect  in  the  positions,  that  a  portion  of  the  fund  in 
court  is  to  be  considered  the  representative  of  the  premises  taken 
for  the  street,  and  that  the  mortgagees,  taking  possession  of  either 

,  the  premises  or  the  substitute,  became  liable  for  such  covenants 

^s  run  with  the  land,  and  that  this  covenant  to  pay  assessment^ 
is  of  that  character,  it  seems  to  follow  that  the  mortgageesj^njhis 

~^ase  musTFe" responsible  for  their  proportion  of  the  assessijient, 
unless,  as  they  allege,  the  breaches  occurred  previous  to  the  assign- 
ment.^ 

Eaton  v.  Whiting,  3  Pick.  484  (1826).— Parker,  C.  J.     The 
opinion  expressed  in  the  case  of  Blanchard  v.  Colburn,  16  Mass. 


1  That  a  mortgage  of  a  term  does 
not  constitute  a  breach  of  a  covenant 
not  to  assign,  see  Riggs  v.  Pursell,  66 
N.  Y.  193  (1876);  Crouse  v.  Michell, 
130  Mich.  347,  90  N.  W.  32  (1902). 
Contra, — Serjeant,  Nash,  Field  dfc  Co. 
[1903],  2  K.  B..  403.  Cf.  Doe  v. 
Hogg,  4  Dowl.  &  Ry.  226  (1824). 

In  Johnston  v.  Flickinger,  160 
N.  Y.  Supp.  962  (1916),  certain 
property  was  leased  under  a  covenant 
forbidding  any  assignment  of  the 
leasehold  without  the  consent  of 
the  landlord.  Thereafter  the  lessee 
mortgaged  his  leasehold,  and  it  was 


sold  under  foreclosure  proceedings. 
Held,  the  covenant  in  the  lease 
against  assignment  was  not  violated, 
such  sale  being  by  operation  of  law. 
To  similar  effect  see  Riggs  v.  Pursell, 
supra;  Dunlop  v.  Mulry,  8.5  .\pp. 
Div.  498,  83  N.  Y.  Supp.  477,  1104 
(1903).  But  see  Doe  v.  Hawke,  2 
East,  481  (1802);  West  Shore  Rd.  v. 
Wenner,  70  N.  J.  Law,  233,  50  Atl. 
408,  aff'd  71  N.  J.  L.  682,  60  Atl. 
1134  (1904). 

With  the  principal  case,  cf.  Cen- 
tury Holding  Co.  v.  Ehling  Brewing 
Co.,  162  N.  Y.  Supp.  1061  (1917). 


270 


COMMON    LAW   RELATIONS 


Rep.  345,  that  the  interest  of  a  mortgagee  in  real  estate  mortgaged 
to  him  for  security  of  a  debt,  or  the  performance  of  a  condition,  is 
not  Hable  to  be  levied  upon  for  the  debts  of  the  mortgagee  and  so, 
of  course,  is  not  liable  to  attachment  on  mesne  process,  we  see  no 
cause  to  change.  It  is  in  fact  but  a  chose  in  action,  at  least  until  i 
entry  to  foreclose,  and  although  the  legal  effect  of  the  mortgage  is 
to  give  an  immediate  right  of  entry  or  of  action  to  the  mortgagee, 
yet  the  estate  does  not  become  his,  in  fact,  until  he  does  some  act 
to  divest  the  mortgagor,  who,  to  all  intents  and  purposes,  remains 
the  owner  of  the  land  until  the  mortgagee  chooses  to  assert  his 
right  under  the  deed.  It  is,  as  before  said,  in  the  nature  of  a  pledge, 
and  a  pawn  or  pledge  cannot  be  seized  in  execution  for  the  debt  of 
the  pledgee.  The  mortgagor  may  be  compelled  to  pay  over  the 
debt  to  the  creditor  of  the  mortgagee  on  the  trustee  process,  with 
the  same  exceptions  as  are  provided  for  other  cases,  and  payment 
under  such  process  will  discharge  the  mortgage  pro  tanto;  so  that 
the  creditor  of  the  mortgagee  is  not  without  remedy,  as  has  been 
suggested.  The  law  in  New  York  and  Connecticut  is  the  same  as 
with  us.  In  the  courts  of  both  those  States  it  has  been  decided 
that  a  mortgagee  before  entry  has  not  such  an  interest  in  the  land 
as  can  be  sold,  levied  upon,  or  attached.  See  Jackson  v.  Willard, 
4  Johns.  Rep.  41;  Runyan  v.  Mersereau,  11  Johns.  Rep.  534;  John- 
S071  v.  Hart,  3  Johns.  Cas.  329;  also  Huntington  v.  Smith,  4  Conn. 
Rep.  237,  in  which  Hosmer,  C.  J.,  states  at  large  the  reasons  similar 
to  those  given  in  Blanchard  v.  Colburn  by  this  court.  Before  the 
case  of  Blanchard  v.  Colburn  the  same  principle  had  been  decided 
in  the  case  of  Portland  Bank  v.  Hall,  13  Mass.  Rep.  207.  So  that 
we  are  warranted  in  considering  it  as  settled  law,  that  the  interest 
of  a  mortgagee  before  entry  is  not  attachable,^  and  we  might  add 
with  Hosmer,  C.  J.,  in  the  case  cited  from  the  Connecticut  Re- 
ports,^ that  we  doubt  whether  it  is  attachable  before  foreclosure, 
for  until  then  all  the  inconveniences  suggested  as  the  ground  of 
decision  would  occur.^ 


1  "Judge  Trowbridge  was  of  a  dif- 
ferent opinion  {iride  8  Mass.  Rep. 
565),  and  much  respect  is  due  to 
him.  But  the  law  respecting  mort- 
gaged estates  has  been  changed  by 
the  legislature  since  his  time,  it  being 
enacted  by  the  statute  of  1788,  c.  51, 
that  such  estates  shall  be  assets  in 
the  hands  of  executors  and  adminis- 
trators, and  be  distributed  as  per- 
sonal estate." — Per  Parker,  C.   J., 


in  Blanchard  v.  Colburn,  16  Mass.  345 
(1820). 

2  "The  land  cannot  be  taken  for 
the  debts  of  the  mortgagee  until  his 
entry  upon  it,  and,  in  my  opinion, 
until  foreclosure."  Huntington  v. 
Smith,  4  Conn.  235  (1822). 

'  Rickert  v.  Madeira,  1  Rawle  (Pa.), 
325  (1829);  Nicholson  v.  Walker, 
4  Bradw.  (111.)  404  (1879),  accord. 
So  are  the  authorities  generally. 


TRIMM    V.    MARSH  271 

TRIMM   V.   MARSH 
Court  of  Appeals  of  New  York,  1874 

(54  A^.  Y.  599) 

Appeal  from  order  of  the  General  Term  of  the  Supreme  Court 
in  the  first  judicial  department,  reversing  a^  judgment  in  favor  of 
plaintiffs  entered  upon  the  decision  oTtTie'^  court  at  Special  Term, 
and  ordering  a  new  trial.    (Reported  below,  3  Lans.  509.) 

This  was  an  action  for  an  accounting  as  to  the  amount  due  upon 
a  bond  and  mortgage,  and  for  the  recovery  of  the  possession  of  the  ^ 
mortgaged  premises,  upon  payment  of  the  amount  due. 

In  1858  one  Ridgway,  being  the  owner  of  certain  premises 
.  situate  in  the  City  of  New  York,  mortgaged  them  to  an  insurance 
company  to  secure  $2,000;  the  insurance  company  assigned  the 
mortgage  to  the  defendant,  Sarah  A.  Marsh.  Ridgway  afterward 
conveyed  the  premises  to  the  plaintiff,  Brown,  who  subsequently, 
in  October,  1865,  entered  into  an  agreement  with  plaintiff,  Trimm, 
to  convey  the  same  to  him.  In  1861  the  defendant,  Sarah,  com- 
menced an  action  to  foreclose  this  mortgage,  making  plaintiff. 
Brown,  and  others  parties,  and  obtained  judgment  of  foreclosure. 
The  premises  were  sold  under  the  judgment  in  1862,  and  defendant, 
Sarah  A.  Marsh,  became  the  purchaser,  and  received  a  sheriff's 
deed.  Immediately  after  the  sale  she  entered  into  possession  of 
the  premises,  and  she  or  the  other  defendant  has  ever  since  been 
in  possession.  In  October,  1864,  by  an  order  of  the  Supreme 
Court,  granted  after  due  notice  and  hearing  the  parties  interested, 
the  foreclosure  sale  was  set  aside  and  declared  null  and  void,  and 
a  resale  was  ordered,  which  never  took  place.  In  November, 
1864,  the  defendant,  Sarah  A.  Marsh,  recovered  a  judgment 
against  plaintiff.  Brown,  which  was  duly  entered  and  docketed, 
and  in  1865  she  caused  an  execution  to  be  issued  upon  said  judg- 
ment to  the  Sheriff  of  New  York,  who,  in  May  of  the  same  year, 
sold  all  ''the  right-,  title  and  interest"  of  which  the  said  Elizabeth 
C.  Brown  was  seized  or  possessed  in  the  said  land,  the  said  Sarah  A. 
Marsh  becoming  the  purchaser  and  taking  the  sheriff's  certificate 
of  sale.  In  September,  1865,  she  conveyed  the  said  premises  by 
deed  to  the  other  defendant,  and  in  September,  1866,  after  the 
commencement  of  this  suit,  she  also  transferred  to  him  the  sher- 
iff's certificate,  and  he  soon  after  received  the  sheriff's  deed.  The 
defendant,  William  B.  Marsh,  had  notice  of  all  the  facts  when  he 


272  COMMON    LAW   RELATIONS 

took  his  title,  and  was  not  a  bona  fide  purchaser  for  value.  Since 
the  defendant?  went  into  possession  of  the  premises  they  have 
assumed  and  claimed  an  absolute  title,  free  from  any  right  of  re- 
demption in  the  plaintiffs  or  either  of  them. 

The  plaintiffs  commenced  this  action  to  redeem  the  said  premises 
from  the  mortgage  and  judgment  of  foreclosure,  and  the  principal 
defence  relied  on  by  the  defendants  was  their  title  under  the  judg- 
ment and  execution  sale  against  plaintiff,  Brown.  The  referee 
decided  the  same  in  favor  of  plaintiffs,  holding  that  the  execution 
sale,  being  made  by  the  assignee  of  the  mortgagee  in  possession, 
was  null  and  void  and  conferred  no  title  upon  the  purchaser. 

Earl,  C.  The  only  legal  proposition  involved  in  this  case,  which 
we  deem  it  important  to  consider,  is  whether  a  mortgagee  of  real 
estate  in  possession  can  cause  the  equity  of  redemption  of  the 
mortgagor  to  be  sold  on  an  execution  and  become  the  purchaser  of 
the  same,  and,  after  obtaining  the  sheriff's  deed,  set  up  his  title 
thus  acquired  against  the  claim  of  the  mortgagor  to  redeem  from 
the  mortgage  in  an  equitable  action  commenced  by  him  for  that 
purpose;  or,  to  state  the  proposition  in  other  words,  has  the  owner 
of  the  equity  of  redemption  of  mortgaged  premises,  after  default 
and  after  the  owiier  of  the  mortgage  has  taken  possession,  such  an 
interest  in  the  premises  as  can  be  sold  upon  execution  against  him? 
If  this  question  be  answered  in  the  affirmative,  the  decision  of  the 
General  Term  was  right  and  must  be  affirmed. 

The  respective  rights  of  the  mortgagor  and  mortgagee  in  the 
land  mortgaged  have  been  the  subject  of  much  discussion,  and  it  is 
impossible  to  reconcile  all  that  learned  judges  and  writers  have 
,  said  upon  the  subject.  By  the  common  law  of  England  the  legal 
/  estate  was  vested  in  the  mortgagee,  to  be  defeated  by  the  perform- 
ance of  a  condition  subsequent,  to  wit,  payment  at  the  law  day.  In 
default  of  such  payment,  the  title  became  absolute  and  irredeem- 
able in  the  mortgagee.  But,  two  centuries  ago,  courts  of  equity 
assumed  jurisdiction  to  relieve  mortgagors  against  forfeitures,  and, 
thenceforth,  in  equity  a  mortgage  has  been  regarded  as  a  mere 
security,  as  creating  an  interest  in  the  mortgaged  premises  of  a 
personal  nature,  like  that  which  the  mortgagee  has  in  the  debt 
itself. 

These  equitable  principles  have  had  an  increasing  influence  upon 
courts  of  law,  and  Chancellor  Kent  says  that  "the  case  of  mort- 
gages is  one  of  the  most  spendid  instances  in  the  history  of  our  juris- 
prudence of  the  triumph  of  equitable  principles  over  technical 


TRIMM   V.    MARSH  273 

rules,  and  the  homage  which  those  principles  have  received  by 
their  adoption  in  the  courts  of  law"  (4  Kent's  Com.  158). 

The  common-law  rule,  as  modified  by  the  equitable  principles 
above  alluded  to,  still  prevails  in  England.^     There  the  courts 
still  hold  that  the  legal  title  passes  to  the  mortgagee,  and  becomes 
by  default  absolutely  vested  in  him  at  law,  and  that  the  mortgagor 
has,  after  default,  nothing  but  an  equity  of  redemption  to  be  en- 
forced in  a  court  of  equity.    After  default  the  mortgagor  can  again 
become  reinvested  with  the  title  to  his  land  only  by  a  reconvey- 
ance by  the  mortgagee.    The  same  rule  prevails  in  the  New  Eng- 
land States,  and  many  of  the  other  States  of  the  Union.    But  this 
common-law  rule  has  never,  to  its  full  extent,  been  adopted  in  this 
State.     Here  the  mortgagor  has,  both  in  law  and  equity,  been  * 
regarded  as  the  owner  of  the  fee,  and  the  mortgage  has  been  re-  j 
garded  as  a  mere  chose  in  action,  a  mere  security  of  a  personal  | 
nature  {Waters  v.  Stewart,  1  Caines'  Cases  in  Error,  47;  Jackson  v.  ' 
Willard,  4  Johns.  42;  Runyan  v.  Mersereau,  11  id.  534;  Astor  v. 
Hoyt,  5  Wend.  603;  Packer  v.  Rochester  &  Syracuse  Railroad  Co.. 
17  N.  Y.  283-295;  Kortright  v.  Cady,  21  id.  343;  Power  v.  Lester, 
23  id.  527 ;  Merritt  v.  Bartholick,  36  id.  44) . 

Prior  to  the  Revised  Statutes  the  mortgagee  could  maintain  ' 
ejectment  to  recover  tlie  mortgaged  premises.  This  right  has  l)een 
taken  away  (2  R.  S.  312),  and  now  the  mortgagor,  both  before  and 
aiter  default,  is  entitled  to  the  possession  of  the  premises,  of  which  / 
he  cannot  be  deprived  without  his  consent ,  except  by  foreclosure,  i 
It  is  not  disputed  that  before  possession  taken  by  the  mortgagee 
the  mortgagor  has  an  interest  in  the  real  estate  which  can  be  sold 
upon  execution;  that  his  widow  is  entitled  to  dower;  that  he  can 
convey  and  devise  his  interest  as  real  estate;  that  at  his  death  it 
descends  to  his  heirs;  that  he  has  every  attribute  and  right  of  an 
absolute  owner  of  the  real  estate,  subject  to  the  lien  of  the  mort- 
gage, and  that  his  title  can  be  defeated  only  by  foreclosure.  It  is 
not  disputed  that  the  mortgagee  before  possession  taken  has  only  a 
chose  in  action;  that  he  holds  the  mortgage  only  as  security'  for  the 
debt;  that  he  can  sell  the  bond  and  mortgage  by  mere  delivery 
as  personal  property;  that  at  his  death  they  pass  to  his  personal 
representatives  as  a  portion  of  his  personal  estate;  that  he  has  no 
such  estate  in  the  land  as  can  be  sold  on  execution,  or  as  he  can 
give  his  widow  dower;  and  that  he  has  no  attribute  of  ownership 

*  In  England  to-day,  a  statute  pro-       and  not  to  the  heir.    St.  44  &  45  Vict., 
vides  that  the  mortgagee's  interest       Chap.  41,  c.  41,  §  30. 
passes  to  the  personal  representative 


274 


COMMON    LAW    RELATIONS 


in  the  land.  It  was  said  by  Judge  James,  in  Power  v.  Lester  (supra), 
that  "a  mortgage  is  a  mere  security,  an  incumbrance  upon  land. 
It  gives  the  mortgagee  no  title  or  estate  whatever.  The  mortgagor 
remains  the  owner,  and  may  maintain  trespass  even  against  the 
mortgagee.  A  mortgage  is  but  a  chattel  interest;  it  may  be  as- 
signed by  deUvery,  and  cannot  be  seized  and  sold  on  an  execution." 
Judge  Pratt  says,  in  Packer  v.  The  Rochester  &  Syracuse  Railroad 
Company  (supra),  that  "a  mortgagee  has  a  mere  chose  in  action, 
secured  by  a  lien  upon  the  land.  Since  the  Revised  Statutes  there 
is  no  attribute  left  in  the  mortgagee,  before  foreclosure,  upon  which 
he  can  make  any  pretense  for  a  claim  of  title.  For  the  mere  right, 
when  he  goes  into  possession  by  the  consent  of, the  mortgagor, 
to  retain  possession,  is  not  an  attribute  of  title.  He  would  have  the 
same  right  in  case  of  a  pledge." 

At  common  law,  payment  or  tender  at  the  law  day  extinguished 
the  lien  of  the  mortgage  and  reinvested  the  mortgagor,  without  a 
reconveyance  by  the  mortgagee,  with  his  title.  But  tender  or 
payment  after  the  law  day  did  not  have  this  effect,  and  in  such 
case  a  reconveyance  was  necessary;  and  such  is  still  the  rule  in 
England  and  in  many  of  the  States  of  the  Union.  But  it  has^l-^ 
ways  been  the  law  of  this  State,  tliat^ayment  or  tender,  at  any- 
"tirne~alter  tiie  mortgage  debt  became  due  and  before  foreclosure, 
destroyed  the  lien  of^  the  mortgage  and  restored  the  mortgagor: 
to  his  full  title.  As  the  mortgagee  had  no  title,  a  reconveyance 
was  not  required  by  the  law  as  expounded  by  our  courts.  So  that 
here  the  term  law  day,  which  occupied  such  a  prominent  place 
in  the  early  discussions  as  to  mortgages,  has  no  particular  signif- 
icance. The  mortgagor  has  his  "law  day"  until  his  title  has  been^ 
foreclosed  by  sale  under  the  mortgage,  and  it  is  a  misnomer  jn 
this  State  to  call  the  mortgagor's  right  in  the  land,  before  or  after 
default,  an  equity  of  redemption,  a  mere  right  to  go  into  equity 
and  redeem.  This  was  a  proper  description  of  the  mortgagor's" 
right  in  the  land  according  to  the  law  as  expounded  in  England. 
But  in  this  State  the  interest  of  the  mortgagor  in  the  land  is  the 
same  before  and  after  default,  and  is  a  legal  estate,  with  all  the 
incidents  and  attributes  of  such  an  estate. 

But  it  is  claimed  by  the  learned  counsel  for  the  appellants  that 
the  position  of  the  mortgagee  is  materially  changed  when  he  gets 
possession.  It  is  true,  notwithstanding  the  provision  of  the  Re- 
vised Statutes,  which  prohibits  an  action  of  ejectment  by  the  mort- 
gagee to  obtain  the  possession  of  the  mortgaged  premises,  that 
after  he  has  lawfully  obtained  the  possession  he  may  retain  it  until 


TRIMM    V.    MARSH  275 

the  debt  secured  by  the  mortgage  has  been  paid.  Before  taking 
possession  the  mortgagee  has  no  title  in  the  lands.  How  can  the 
mere  possession  change  the  title  from  the  mortgagor  to  the  mort-  -'' 
gagee,  or  in  any  way  diminish  the  estate  of  the  one  or  enlarge  the  ' 
estate  of  the  other?  Before  taking  possession  the  mortgagee  had 
a  mere  hen  upon  the  real  estate  pledged  for  the  security  of  his 
debt.  After  possession  he  has  in  his  possession  the  property  pledged 
as  his  security,  the  title  remaining  as  it  was  before.  The  mort- 
gagor's title  is  still  a  legal  one,  with  all  the  incidents  of  a  legal 
title  subject  to  the  pledge,  and  the  mortgagee's  interest  is  still  a 
mere  debt  secured  by  the  pledge.  If  the  mortgagee  should  die  in 
possession,  the  debt  would  still  go  to  his  personal  representatives 
to  be  administered  as  personal  estate,  and  the  mortgagor's  title 
would  go  to  his  heirs,  Pajmient,  or  even  tender,  would  destroy 
the  mortgagee's  right  to  retain  possession,  and  would  enable  the 
mortgagor  to  maintain  ejectment  to  recover  possession.  The  mort- 
gagee, in  such  case,  so  far  from  having  any  title,  holds  the  land  as 
the  land  of  the  mortgagor,  and  is  liable  to  account  to  him  for  the 
rents  and  profits.  Judge  Comstock,  in  Kortright  v.  Cady  (supra), 
says:  ''The  mortgagee's  right  to  bring  ejectment,  or,  being  in  pos- 
session, to  defend  himself  against  an  ejectment  by  the  mortgagor, 
is  but  a  right  to  recover  or  retain  possession  of  the  pledge  for  the 
purpose  of  paying  the  debt.  Such  a  right  is  but  the  incident  of 
the  debt,  and  has  no  relation  to  a  title  or  estate  in  the  land.  The 
notion  that  a  mortgagee's  possession,  whether  before  or  after 
default,  enlarges  his  estate,  or  in  any  respect  changes  the  simple 
relation  of  debtor  and  creditor  between  him  and  his  mortgagor, 
rests  upon  no  foundation.  We  may  call  it  a  just  and  lawful  pos- 
session, like  the  possession  of  any  other  pledge,  but  where  its  ob- 
ject is  accomplished  it  is  neither  just  nor  lawful  for  an  instant 
longer." 

I  cannot  doubt,  therefore,  that  the  mortgagor,  after  default,  and 
after  the  mortgagee  has  taken  possession,  has  such  an  estate  in  the 
land  as  can  be  sold  upon  execution.  It  is  not  necessary  to  decide 
whether,  in  such  a  case,  the  mortgagee  has  also  such  an  estate  in  the 
land  as  can  be  sold  upon  execution,  because,  if  he  has,  it  does  not 
follow  that  the  mortgagor  has  not  also  such  a  right.  They  might 
each  own  an  estate  which  could  be  sold.  But  I  am  of  opinion  that 
the  mortgagee  has  no  estate  in  the  land  which  can  be  sold  on  execu- 
tion. His  interest  is  a  mere  chose  in  action,  a  debt  secured  by  a 
pledge  of  real  estate.  His  debt  is  not  merged  in  the  real  estate  by 
the  possession.    He  has  no  interest  in  the  real  estate  which  he  can 


276  COMMON    LAW    RELATIONS 

sell,  or  which  can  be  sold  separate  from  the  debt.  Such  a  sale  would 
convey  nothing.  Whoever  took  the  real  estate  from  him  would 
take  it  sul)jeci  to  the  same  liability  as  he  was  under  to  account 
for  the  rents  and  profits  to  the  mortgagor.  It  has  been  decided 
that  a  transfer  of  the  mortgage  without  the  debt  is  a  mere  nullity 
{Merritt  v.  Bartholick,  supra). 

The  fact  that  at  the  time  of  the  execution  sale,. the  defendants 
were  in  possession,  claiming  the  absolute  title,  can  make  no  differ- 
ence, as  land  held  adversely  to  the  true  owner  can  be  sold  upon 
execution  against  him  {Tuttle  v.  Jackson,  6  Wend.  213;  Truax  v. 
Thorn,  2  Barb.  156). 

I  am,  therefore,  of  the  opinion  that  the  title  of  the  defendant 
under  the  execution  sale  was  valid,  and  that  the  plaintiff  had  no 
right  to  redeem. 

The  order  of  the  General  Term  must  be  affirmed,  and  judgment 
absolute  rendered  against  the  plaintiffs,  with  costs. ^'  ^ 


TEFFT  V.   MUNSON 
Court  of  Appeals  of  New  York,  1875 

(57  A^.  F.  97) 

This  was  an  action  to  restrain  defendants,  loan  commissioners 
for  Washington  County,  from  foreclosing  a  mortgage  executed  to 
them  by  Martin  B.  Perkins  and  wife. 

On  the  18th  day  of  January,  1848,  Gamaliel  Perkins  purchased 
of  Cortland  Rowland  certain  lands  in  Washington  County,  which 
were  conveyed  to  him  by  warranty  deed  recorded  March  7,  1848, 
in  the  clerk's  office  in  said  county.  Gamaliel  Perkins,  immediately 
after  his  purchase,  let  his  son,  Martin  B.  Perkins,  into  possession 
of  the  premises,  who  forged  a  deed  of  the  land  from  his  father  to 
himself  and  placed  it  upon  record  in  the  clerk's  office  of  said  county, 
May  27,  1850.    On  the  1st  day  of  October,  1850,  Martin  B.  and 

1  The  concurring  opinion  of  Rey-  for  the  doctrine  of  a  stranded  juris- 

NOLDS,  C,  as  well  as  the  elaborate  diction. 

dissenting  opinion  of  Gray,  C,  ar-  ^  New   York    Code   Civ.    Proc, 

guing  for  the  legal  character  of  the  §  1432.      The     judgment     debtor's 

mortgage  estate,  especially  after  de-  equity  of  redemption  in  real  property 

fault  and  entry,  is  omitted.  mortgaged  shall  not  be  sold  by  virtue 

This   case  represents   the  general  of  an  execution,  issued  upon  a  judg- 

rule  in  the  United  States.     But  see  ment    recovered    for    the    mortgage 

Van  Ness  v.  Hyatt,  13  Pet.  294  (1839),  debt  or  any  part  thereof. 


TEFFT   V.    MUNSON  277 

bis  wife  executed  a  mortgage  upon  said  land  to  the  loan  commis- 
sioners of  said  county,  to  secure  the  sum  of  SIOOO  loaned  to  him. 
Tliis  mortgage  contained  covenants  that  iMartin  B.  and  his  wife 
were  lawfully  seised  of  a  good,  sure,  perfect,  absolute  and  inde- 
feasible estate  of  inheritance  in  the  premises,  and  that  they  were 
free  and  clear  of  and  from  all  former  and  other  gifts,  grants,  bar- 
gains, sales,  hens,  etc.,  and  this  mortgage  was,  on  the  day  of  its 
date,  duly  recorded  in  the  book  kept  by  the  loan  commissioners,  as 
required  by  law.  On  the  23d  of  January,  1860,  a  deed  of  said 
lands,  bearing  date  April  1,  1853,  was  recorded  in  the  county 
clerk's  office,  which  purported  to  be  executed  by  Martin  B.  and 
wife  to  his  father.  On  the  16th  day  of  December,  1859,  Gamaliel 
Perkins  conveyed  said  land  to  Martin  B.,  by  deed  recorded  Janu- 
ary 14,  1860.  Until  this  conveyance  from  his  father  Martin  B. 
had  no  title  to  the  land,  although  he  remained  in  possession  of  the 
same  from  1848.  On  the  31st  of  January,  1867,  Martin  B.,  being 
still  in  possession  of  the  lands,  conveyed  them  to  the  plaintiff,  who 
paid  full  value  for  the  same  without  any  actual  notice  of  the  mort- 
gage to  the  loan  commissioners.  The  deed  to  the  plaintiff  was  re- 
corded February  9,  1867. 

The  court  below  decided  that  plaintiff  was  not  entitled  to  the  re- 
lief sought,  and  directed  a  dismissal  of  the  complaint.  Judgment 
was  perfected  accordingly. 

Earl,  C.  The  plaintiff  claims  that  the  mortgage  to  the  loan 
commissioners  has  no  vahdity  as  against  him,  and  that  his  deed 
has  priority  over  it  under  the  laws  in  reference  to  the  registry  of 
deeds  and  mortgages.  It  is  a  principle  of  law^jot  now  open_to 
doubi^JJaat-ei'dioarily,  irbne  who  has  no  title  tolands,.  ne  vert  her 
less  makes  a  deed  of  conveyance,  with  warranty,  jmd  afterward 
himself  purchases  and  receives  the  title,  the  same  will  vest  immedi- 
ately in  his  grantee  who  holds  his  deed  with  warranty  as  against, 
%iif|i  pT-antor  by  e^itoppeL.  In  such  case  the  estoppel  is  held  to 
bind  the  land,  and  to  create  an  estate  and  interest  in  it.  The 
grantor  in  such  case,  being  at  the  same  time  the  warrantor  of  the 
title  which  he  has  assumed  the  right  to  convey,  will  not,  in  a  court 
of  justice,  be  heard  to  set  up  a  title  in  himself  against  his  own  prior 
grant ;  he  will  not  be  heard  to  say  that  he  had  not  the  title  at  the 
date  of  the  conveyance,  or  that  it  did  not  pass  to  his  grantee  in 
virtue  of  his  deed  (Work  v.  Welland,  13  N.  H.  389;  Kimball  v. 
Blaisdell,  5  id.  533;  Sojnes  v.  Skinner,  3  Pick.  52;  The  Bank  of 
Utica  V.  Mersereau,  3  Barb.  Ch.  528,  567;  Jackson  v.  Bull,  1  Johns. 


278  COMMON    LAW   RELATIONS 

Cas.  81,  90;  White  v.  Patten,  24  Pick.  324;  Pike  v.  Gahin,  29  Maine, 
183).  And  the  doctrine,  as  will  be  seen  by  these  authorities,  is 
equally  well  settled  that  the  estoppel  binds  not  only  the  parties, 
but  all  privies  in  estate,  privies  in  blood  and  privies  in  law,  and  in 
such  case  the  title  is  treated  as  having  been  previously  vested  in 
the  grantor,  and  as  having  passed  immediately  upon  the  execu- 
tion of  his  deed,  by  way  of  estoppel.  In  this  case  Martin  B.  Per- 
kins conveyed  the  lands  to  the  loan  commissioners,  by  mortgage 
with  warranty  of  title,  and  thereby  became  estopped  from  disput- 
ing that,  at  the  date  of  the  mortgage,  he  had  the  title  and  con- 
veyed it,  and  this  estoppel  applied  equally  to  the  plaintiff  to  whom 
he  made  a  subsequent  conveyance,  by  deed,  after  he  obtained  the 
title  from  his  father,  and  who  thus  claimed  to  be  his  privy  in  estate. 
The  plaintiff  was  estopped  from  denying  that  his  grantor,  Martin 
B.  Perkins,  had  the  title  to  the  land  at  the  date  of  the  mortgage, 
and  he  must,  therefore,  for  every  purpose  as  against  the  plaintiff, 
be  treated  as  having  the  title  to  the  land  at  that  date. 

I,  therefore,  can  see  no  difficulty  in  this  case,  growing  out  of  the 
law  as  to  the  registry  of  conveyances.  Martin  B.  Perkins,  having 
title,  made  the  mortgage  which  was  duly  recorded.  He  then  con- 
veyed to  his  father  and  the  deed  was  recorded.  His  father  then 
conveyed  to  him  and  the  deed  was  recorded.*  He  then  conveyed  to 
the  plaintiff  and  his  deed  was  recorded.  Thus  the  title  and  record 
of  the  mortgage  were  prior  to  the  title  and  record  of  the  deed  to 
plaintiff,  and  the  priority  claimed  by  plaintiff  cannot  be  allowed. 
Assuming  it  to  be  the  rule  that  the  record  of  a  conveyance  made 
by  one  having  no  title,  is,  ordinarily  a  nullity,  and  coBftstructive 
notice  to  no  one,  the  plaintiff  cannot  avail  himself  of  this  rule,  as 
he  is  estopped  from  denying  that  the  mortgagor  had  the  title  at  the 
date  of  the  mortgage. 

I  am,  therefore,  of  opinion  that  the  judgment  should  be  affirmed, 
with  costs. 

For  affirmance.  Earl,  Gray  and  Johnson,  CC. 

For  reversal,  Lott,  Ch.  C,  and  Reynolds,  C.^ 

Judgment  affirmed.^ 

1  The  dissenting  opinion  of  Rey-  ^  See  also,  Northrup  v.  Ackerman„ 

NOLDS,  C,  is  omitted.  84  N.  J.  Eq.  117  (1914). 


DONOVAN   V.    TWIST  279 


DONOVAN  V.   TWIST 

Supreme  Court  of  New  York,  Appellate  Division,  Third 
Department,  1903 

(85  App.  Div.  130,  83  A^.  Y.  Supp.  76) 

Appeal  bj^  the  defendant,  Salem  Twist,  from  a  judgment  of 
the  County  Court  of  Tompkins  county,  entered  in  the  office  of 
the  clerk  of  the  county  of  Tompkins  on  the  6th  day  of  January, 
1903,  upon  the  decision  of  the  court  rendered  after  a  trial  before 
the  com-t  without  a  jury. 

This  action  is  brought  to  foreclose  a  mortgage  given  by  William 
W.  Smith  upon  the  23d  day  of  March,  1882,  to  plaintiff  to  secure 
a  bond  wherein  said  mortgagor  became  bound  to  pay  to  the  plain- 
tiff the  sum  of  $250.  This  mortgage  was  recorded  in  the  Tompkins 
county  clerk's  office  on  the  24:th  day  of  March,  1882.  At  the  time 
of  the  giving  of  this  mortgage  the  said  William  W.  Smith  had  no 
title  to  the  property.  Upon  the  27th  day  of  March,  1882,  however, 
he  received  a  deed  of  the  property  from  one  William  N.  Noble, 
which  deed  was  recorded  upon  the  said  twenty-seventh  day  of 
March.  Thereafter,  the  said  William  W.  Smith  died,  and  upon 
the  7th  day  of  December,  1901,  the  defendant  Salem  Twist  re- 
ceived a  conveyance  of  the  property  from  the  only  heir  at  law  of 
William  W.  Smith.  This  conveyance  was  received  for  a  valuable 
consideration  and  without  actual  notice  of  the  plaintiff's  claim. 
The  trial  court,  after  having  found  these  facts,  found  as  a  conclu- 
sion of  law  that  the  defendant  Twist  took  the  premises  subject 
to  the  lien  of  the  plaintiff's  mortgage,  and  judgment  was  directed 
for  a  sale  of  the  premises  to  pay  said  mortgage.  From  this  judg- 
ment the  defendant  Twist  has  appealed. 

Smith,  J.  The  mortgage  sought  to  be  foreclosed  was  given  bj' 
the  mortgagor  before  he  had  acquired  title  to  tl^  premises  de- 
scribed therein,  and  without  any  covenant  of  seizin  or  warranty. 
The  rule  of  law  is,  I  think,  clearly  established,  that  such  a  mort- 
gage has  no  greater  effect  than  a  quitclaim  deed,  and  is  not  opera- 
tive upon  a  title  subsequently  acquired.  (Jacksoti  v.  Littelh  56 
N.  Y.  108;  Sparrow  v.  Kingman,  1  id.  256;  M'Crackin  v.  Wright, 
14  Johns.  193;  Jackson  v.  Hubble,  1  Cow.  613.)  It  may  be  that 
if  this  mortgage  had  contained  a  warranty  of  title  or  covenants  of 
seizin,  its  record  would  have  been  constructive  notice  to  the  de- 


280  COMMON   LAW   RELATIONS 

fendant  although  its  date  of  record  was  prior  to  the  date  of  the  deed 
^to  the  mortgagor.  (See  Tefft  v.  Miinson,  57  N.  Y.  97.)  In  the 
'eases  cited  upon  the  respondent's  brief  the  mortgages  held  valid 
as  liens  upon  property  subsequently  acquired  were  all  mortgages 
in  which  there  was  either  a  warranty  or  covenant  by  reason  of 
which  the  mortgagor  and  his  privies  were  estopped  from  denying 
the  title  which  he  had  covenanted  he  possessed.  In  this  mortgage, 
however,  there  is  no  covenant  either  of  seizin  or  of  warranty  and  no 
statement  by  which  the  mortgagor  can  be  estopped  from  claiming 
that  his  title  was  subsequently  acquired.  No  estoppel,  therefore, 
can  be  urged  against  this  defendant  grantee,  who  took  at  least 
the  rights  which  the  mortgagor  had  at  the  time  of  his  grant. 

The  judgment  should,  therefore,  be  reversed. 

All  concur} 


RECTOR  CHRIST  CHURCH   v.   MACK 

Court  of  Appeals  of  New  York,  1883 

(93  N.  Y.  488) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court,  in  the  first  judicial  department,  entered  upon  an  order  made 
October  28,  1881,  which  reversed  a  judgment  in  favor  of  defendant 
Rhoda  E.  Mack,  entered  upon  a  decision  of  the  court  on  trial  at 
Special  Term,  and  directed  judgment  for  plaintiff  for  the  relief 
demanded  in  the  complaint.    (Reported  below,  25  Hun,  418.) 

This  action  was  brought  to  restrain  defendants  from  obstructing 
the  light  and  air  from  the  windows  of  plaintiff's  church  edifice, 
adjoining  a  lot  owned  by  said  defendant,  Rhoda  E.  Mack.  Plain- 
tiff was  formerly  owner  of  said  lot,  which  was  subject  to  a  mortgage 
given  to  one  Bell.  It  conveyed  the  same  to  defendant,  John  Mack, 
subject  to  the  mortgage,  which  the  grantee  assumed  and  agreed  to 
pay.  By  the  deed  an  easement  was  reserved  of  light  and  air  to  the 
grantor's  church  so  long  as  its  pi'emises  were  used  for  church  pur- 
poses. Mack  conveyed  to  a  third  person,  who,  on  the  same  day, 
conveyed  to  Rhoda  E.,  wife  of  said  John  Mack.  Her  deed  was 
made  subject  to  the  Bell  mortgage,  but  contained  no  assumption 
of  the  same  by  her.  The  holder  of  the  mortgage,  at  the  request 
of  defendants  herein,  foreclosed  the  mortgage  by  suit;  plaintiff 

^Accord,  Donovan  v.  Turist,  10.5  (1905);  Mayer  v.  Burr,  133  App.Div. 
App.  Div.  171,  93  N.  Y.  Supp.  990      604,  607  (1909). 


RECTOR    CHRIST   CHURCH    V.    MACK  281 

was  made  a  party  defendant  therein.  Judgment  of  foreclosure  in 
the  ordinary  form  was  entered,  and  upon  the  sale  under  it  Mrs. 
Mack  became  the  purchaser  and  received  the  referee's  deed.  Mrs, 
Mack  thereafter  erected  a  fence  upon  her  lot,  which  cut  off  the 
light  from  the  basement  windows  of  plaintiff's  church. 

Finch,  J.  It  is  conceded  that  a  purchase  under  the  foreclosure 
of  the  Bell  mortgage  would  have  given  to  a  stranger  to  the  title  an 
ownership  discharged  of  the  plaintiff's  easement.  That  the  same 
result  attends  the  purchase  by  ]\Irs.  Mack,  notwithstanding  her 
relation  to  the  property,  follows  from  the  reason  upon  which  the 
conceded  rule  is  founded.  The  statute  provides  that  the  deed  given 
in  pursuance  of  a  sale  on  foreclosure  shall  vest  in  the  purchaser 
"the  same  estate  (and  no  other  or  greater)  that  would  have  vested 
in  the  mortgagee  if  the  equity  of  redemption  had  been  foreclosed," 
and  further  declares  that  such  deeds  shall  be  as  valid  as  if  executed 
by  the  mortgagor  and  mortgagee.  The  construction  to  be  put  upon 
these  two  provisions  was  early  settled  in  this  court  {Brainard  v. 
Co(yper,  10  N.  Y.  358;  Packer  v.  The  Roch.  &  Syracuse  R.  R.  Co., 
17  id.  287).  In  the  last  of  these  cases  it  was  said  that  where  legal 
title  is  concerned,  a  mortgage,  which  for  many  other  purposes  is 
a  mere  chose  in  action,  is  a  conveyance  of  the  land;  that  the  inter- 
est remaining  in  the  mortgagor  is  an  equity,  and  that  the  foreclosure 
cuts  off  and  extinguishes  that  equity,  and  leaves  the  title  conveyed 
by  the  mortgage.  It  was  added  that  such  was  precisely  the  effect 
of  a  strict  foreclosure,  and  that  in  construing  the  statute  its  two 
clauses  were  to  be  read  in  harmony.  It  was,  therefore,  decided  that 
when  the  act  says  the  master's  deed  "shall  have  the  same  validity 
as  if  executed  by  the  mortgagor,  it  is  not  to  be  taken  that  the 
purchaser  is  to  be  considered  as  holding  under  the  mortgagor  by 
title  subsequent  to  the  mortgage  in  a  sense  which  would  subject 
liim  to  the  effect  of  the  mortgagor's  acts  intermediate  the  mortgage 
and  the  foreclosure."  While  it  is  clearly  the  modern  doctrine  that 
the  mortgagee  has  by  virtue  of  his  mortgage  no  estate  in  or  title 
to  the  land,  or  the  right  of  possession  before  or  after  the  mortgage 
debt  becomes  due  (Ten  Eyck  v.  Craig,  62  N.  Y.  421),  and  only  ac- 
quires such  title  by  purchase  upon  the  foreclosure  sale,  yet  the 
character  and  extent  of  his  title  so  acquired  is  described  in  the 
statute  by  a  reference  to  the  old  rule  and  the  old  practice,  when 
the  mortgagor's  right  could  be  fitly  termed  an  equity  of  redemption 
which  could  be  foreclosed,  leaving  an  absolute  estate  in  the  mort- 
gagee.   The  effect  of  the  foreclosure  deed,  therefore,  as  determined 


282  COMMON    LAW   RELATIONS 

by  the  statute,  is  to  vest  in  the  purchaser  the  entire  interest  and 
estate  of  mortgagor  and  mortgagee  as  it  existed  at  the  date  of  the 
mortgage,  and  unaffected  by  the  subsequent  incumbrances  and 
conveyances  of  the  mortgagor.  And  thus,  while  the  plaintiff  cor- 
poration held  title  to  the  iVIack  lot,  they  held  it  subject  to  the  Bell 
mortgage  and  to  the  absolute  title  into  which  that  mortgage 
might  ripen  bj^  a  foreclosure  and  sale.  When  they  sold  to  Mack, 
reserving  an  easement  in  the  lot  for  light  and  air  to  their  adjoin- 
ing windows,  they  held  their  easement,  and  Mack  held  his  owner- 
ship, still  subject  to  the  Bell  mortgage  and  the  absolute  title  into 
which  it  might  be  turned.  IVIack  had  assumed  the  payment  of 
the  Bell  mortgage,  but  conveyed  through  a  third  person  to  his 
wife,  subject  to  that  mortgage,  but  without  any  Hability  for  its 
payment  assumed  by  her.  Upon  its  foreclosure  she  became  the 
purchaser  and  took  the  deed.  That  vested  in  her,  under  the  statute 
provision,  the  title  of  the  mortgagor  and  mortgagee  unaffected 
by  the  intermediate  acts  of  the  mortgagor  and  those  succeeding 
to  his  interest,  unless  there  be  something  in  her  position  which 
subjects  her  to  a  different  rule. 

The  statute  allowed  her  to  be  a  purchaser,  and  in  determining 
the  effect  of  the  foreclosure  deed  its  terms  draw  no  distinction 
among  purchasers.  It  does  not  discriminate.  Whoever  may  law- 
full}^  purchase  becomes  the  purchaser  whose  title  is  described  and 
determined,  and  we  have  no  warrant  in  the  facts  to  take  Mrs. 
Mack  out  of  the  statutory  protection. 

The  argument  of  the  General  Term  and  of  the  learned  counsel 
for  the  respondent  on  this  appeal  were  both  aimed  at  the  result  of 
converting  her  purchase  into  a  mere  payment  and  discharge  of  the 
mortgage  lien,  and  her  deed  into  a  release  of  the  incumbrance.  The 
General  Term  reached  the  result  by  a  disregard  of  the  first  clause 
of  the  statute  declaring  the  effect  of  the  deed,  and  what  seems  to  us 
a  misinterpretation  of  the  second  clause.  In  brief,  the  reasoning 
was  that  the  deed  was  to  be  equivalent  to  one  made  by  the  mort- 
gagor and  mortgagee;  that  the  mortgagor  had  already  conveyed 
and  his  title,  incumbered  by  an  after  constituted  easement,  had 
reached  Mrs.  Mack;  that  she  could  not  be  said  to  purchase  what 
she  already  had ;  that  so  her  deed  was  only  equivalent  to  one  made 
by  the  mortgagee,  and  he  having  no  title,  but  merely  a  lien,  the 
foreclosure  deed  operated  only  as  a  release  to  Mrs.  Mack,  however 
it  might  operate  as  to  a  stranger.  We  deem  this  reasoning  defective 
in  two  respects.  It  construes  the  statute  to  transfer  the  mortgagor's 
title  as  it  stood,  not  at  the  date  of  his  mortgage,  but  burdened  with 


RECTOR    CHRIST   CHURCH   V.    MACK  283 

its  after  incumbrances  and  limitations,  imposed  by  him  or  his 
grantees;  and  it  assumes  what  is  not  true,  that  Mrs.  Mack  already 
had  the  entire  title  of  the  mortgagor,  and  so  could  take  nothing 
from  him  but  only  the  right  of  the  mortgagee.  The  mortgagor 
had  the  absolute  title  incumbered  only  by  the  mortgage.  That 
title  he  transferred  to  the  church,  but  when  the  latter  conveyed  to 
Mack  it  reserved  an  easement  or  servitude,  and  so  parted  with  less 
than  it  received  from  the  mortgagor.  This  title  IMrs.  IVIack  took, 
and  therefore  did  not  get  the  entire  interest  which  the  mortgagor 
himself  had.  There  was  something  which  she  had  not  got,  which 
by  a  foreclosure  of  the  Bell  mortgage  would  pass,  and  which  it  was 
possible  for  her  to  pm-chase. 

A  further  ground  is  stated  which  is  based  upon  a  theory  that 
Mrs.  Mack  by  virtue  of  her  ownership  of  the  lot  came  under  some 
obligation  to  pay  off  the  mortgage,  and  so  could  not  in  equity  as- 
sert a  title  founded  upon  a  breach  of  that  obligation.  Cases  are 
cited  in  other  States  which  hold  that  the  mortgagor  owes  to  his 
mortgagee  the  duty  of  paying  taxes  upon  the  land  and  cannot  by 
neglecting  their  payment  and  causing  a  sale  and  then  becoming  a 
purchaser,  cut  off  the  Hen  of  the  mortgagee.  If  the  purchase  had 
been  made  by  Mr.  Mack,  who  had  assumed  the  payment  of  the 
mortgage,  the  question  would  have  arisen.  But  Mrs.  Mack  owed 
no  duty  of  pa^mient  either  to  the  mortgagee  or  to  the  plaintiff. 
She  assumed  no  such  obligation.  She  violated  no  duty  and  in- 
curred no  personal  Hability  by  omitting  to  pay  off  the  incumbrance. 
It  was  her  right  and  privilege  not  to  do  so,  and  in  the  omission  she 
did  no  wrong  of  which  either  party  could  lawfully  complain.  She 
had  the  right  to  leave  the  mortgagee  to  his  remedy,  and  when  he 
asserted  it,  the  law  allowed  her  to  become  the  purchaser,  and  made 
no  distinction  between  her  rights  and  those  of  a  stranger  to  the 
title. 

It  was  urged  that  this  view  of  the  case  left  the  plaintiff  without 
any  power  to  save  its  easement,  since  on  the  sale  ]\Irs.  Mack  could 
safely  outbid  all  others  and  beyond  the  mortgage  debt.  But  the 
plaintiff  should  not  have  waited  until  the  sale.  When  brought  into 
court  as  a  defendant,  and  certain  to  be  bound  by  the  decree,  it 
should  have  sought  to  modify  the  decree  and,  showing  the  peril 
of  its  easement  and  offering  to  bid  the  full  amount  of  the  mortgage 
debt  and  costs  upon  a  sale  subject  to  the  servitude,  it  should  have 
asked  that  the  sale  be  so  made.  The  mortgagee  could  not  object 
since  his  debt  would  be  paid  in  full  and  he  had  no  greater  right; 
and  Mrs,  Mack  could  have  asserted  no  equity  to  have  the  sale  so 


284  COMMON    LAW    RELATIONS 

made  as  to  free  her  from  the  easement.  But  when  no  limitation  or 
condition  is  imposed  by  the  decree,  and  no  duty  of  payment 
rests  on  the  purchaser,  the  statute  determines  the  estate  which 
passes  by  the  foreclosure  deed. 

The  judgment  of  the  General  Term  should  be  reversed  and  that 
of  the  Special  Term  affirmed,  with  costs. 

All  concur. 

Judgment  accordingly} 


CHAPPELL  V.  JARDINE 

Supreme  Court  of  Errors  of  Connecticut,  1884 

(51  Conn.  64) 

Suit  for  a  foreclosure;  brought  to  the  Superior  Court.  The 
defendants  demurred  to  the  complaint;  the  court  (Andrews,  J.) 
overruled  the  demurrer  and  passed  a  decree  of  foreclosure.  The 
defendants  appealed  to  this  court.  The  case  is  sufficiently  stated 
in  the  opinion. 

Park,  C.  J.  This  is  a  suit  for  the  foreclosure  of  certain  mort- 
gaged premises,  constituting  an  island,  known  as  Ram  Island,  in 
Long  Island  Sound.  The  complaint  alleges  that  the  land  moi-t- 
gaged  at  the  time  the  deed  was  given  lay  in  the  town  of  Southhold, 
Suffolk  County,  in  the  State  of  New  York,  and  it  is  averred  that  the 
mortgage  was  recorded  in  the  office  of  the  clerk  of  Suffolk  County 
in  that  State.  It  is  further  alleged  that  Ram  Island,  by  the  recent 
establishment  of  the  boundary  line  between  the  State  of  New  York 
and  this  State,  has  become  a  part  of  the  town  of  Stonington  in  this 
State.  The  complaint  is  demurred  to,  so  that  the  averment  stands 
admitted  that  the  island  was,  when  the  mortgage  was  made,  a  part 
of  the  State  of  New  York. 

We  have  heretofore  held  (Elphick  v.  Hoffman,  49  Conn.  331) 
that  the  boundary  agreed  upon  by  the  joint  commission  of  the  two 
States  and  established  by  the  legislative  acceptance  of  both  States, 
was  to  be  regarded  as  presumably  a  designation  and  establishment 
of  the  pre-existing  boundary  line  which  had  become  lost,  and  not  as 

1  The  principal  case  was  followed  redemption    is    foreclosed    the    pur- 

in  National  Bank  v.  Levy,  127  N.  Y.  chaser   takes   the   estate   the   mort- 

.549  (1891),  where  Bradley,  J.,  said  gagor  had  at  the  time  he  gave  the 

at  p.  553:  "And  when  the  equity  of  mortgage." 


CHAPPELL    V.    JARDINE  285 

the  establishment  of  a  new  line,  leaving  the  matter  open  to  proof  in 
special  cases.  If  we  should  appl^^  that  rule  here,  and  consider  the 
island  in  question  as  having  been  legall}'  a  part  of  this  State  when 
the  mortgage  was  made,  we  should  at  once  encounter  another  ques- 
tion of  a  serious  nature.  There  can  be  no  question  that  whatever 
has  been  the  de  jure  jurisdiction  over  the  island,  it  has  been  for 
many  years  within  the  de  facto  jurisdiction  of  the  vState  of  New 
York;  and  we  should  be  compelled  to  determine  the  legal  effect 
upon  this  mortgage  of  that  de  facto  jurisdiction. 

We  have  thought  it  as  well,  therefore,  to  take  the  case  as  the 
parties  have  themselves  presented  it,  the  plaintiff  by  the  aver- 
ments of  his  complaint  and  the  defendants  by  the  admissions  of 
their  demurrer,  and  regard  the  island  in  question  as  having  been 
within  the  State  of  New  York  when  the  mortgage  was  made,  and 
afterwards  brought  within  this  State  by  the  establishment  of  the 
boundary  line.  Indeed,  as  the  proceeding  is  in  error,  we  cannot 
properly  govern  ourselves  by  anything  but  the  record  as  it  comes 
before  us.  And  in  treating  the  island  as  within  the  State  of  New 
York  when  the  mortgage  was  made  we  are  regarding  the  contract 
and  the  rights  of  the  parties  under  it,  precisely  as  they  themselves 
understood  them  at  the  time. 

The  mortgaged  premises  having  been  in  the  State  of  New  York 
when  the  mortgage  was  made,  it  is  of  course  to  be  governed  in  its 
construction  and  effect  by  the  laws  of  that  State  then  in  force.  In 
McCormick  v.  SuUiimit,  10  Wheat.  192,  the  court  say:  "It  is  an 
acknowledged  principle  of  law  that  the  title  and  disposition  of  real 
property  is  exclusively  subject  to  the  laws  of  the  country  where  it 
is  situated,  which  can  alone  prescribe  the  mode  by  which  a  title 
to  it  can  pass  from  one  person  to  another."  The  same  doctrine 
is  held  in  United  States  v.  Crosby,  7  Cranch,  115;  Kerr  v.  Moon,  9 
Wheat.  565;  Darby  v.  Mayer,  10  id.  465,  and  in  many  other  cases. 
Indeed  the  doctrine  is  unquestioned  law  everywhere. 

Now,  according  to  the  laws  of  the  State  of  New  York  then  and 
still  in  force,  a  mortgage  of  real  estate  creates  a  mere  chose  in 
action,  a  pledge,  a  security  for  the  debt.^  It  conveys  no  title  to  the 
property.  The  claim  of  the  mortgagee  is  a  mere  chattel  interest. 
He  has  no  right  to  the  possession  of  the  property.  The  title  and 
seisin  remain  in  the  mortgagor,  and  he  can  maintain  trespass  and 
ejectment  against  the  mortgagee,  if  he  takes  possession  of  the 
property  without  the  consent  of  the  mortgagor. 

'  For  the  New  York  view,  see  also,      Barnes  v.  Souihfield  Beach  Co.,  202 

N.  Y.  301  (1911). 


286  COMMON    L\W   RELATIONS 

It  follows,  therefore,  that  while  the  land  in  question  remained 
ill  the  State  of  New  York  it  was  incumbered  bj'  a  mortgage  of  this 
character;  and  when  it  came  into  this  State  it  bore  with  it  the  same 
burden  precisely.  There  was  nothing  in  the  change  of  jurisdiction 
that  could  affect  the  contract  of  mortgage  that  had  been  made 
between  the  parties.  The  title  to  the  property  continued  to  remain 
in  the  mortgagor,  and  it  remains  in  him  still.  This  is  clear.  The 
laws  of  this  State  could  not  make  a  new  contract  for  the  parties 
or  add  to  one  already  made.  They  had  to  take  the  contract  as 
they  found  it. 

Now  it  is  clear  that  there  is  no  remedy  by  way  of  foreclosure 
known  to  our  law  which  is  adapted  or  appropriate  to  giving  relief 
on  a  mortgage  of  this  character.  Our  remedy  is  adapted  to  a  mort- 
gage deed  which  conveys  the  title  of  the  property  to  the  mortgagee, 
and  when  the  law  day  has  passed  the  forfeiture,  stated  in  the  deed, 
becomes  absolute  at  law,  and  vests  a  full  and  complete  title  in  the 
mortgagee,  with  the  exception  of  the  equitable  right  of  redemption, 
which  still  remains  in  the  mortgagor.  The  object  of  the  decree  of 
foreclosure  is  to  extinguish  this  right  of  redemption  if  the  mortgage 
debt  is  not  paid  by  a  specified  time.  The  decree  acts  upon  this 
right  only.  It  conveys  nothing  to  and  decrees  nothing  in  the  mort- 
gagee if  the  debt  is  not  paid.  After  the  law  day  has  passed  the 
right  of  redemption  becomes  a  mere  cloud  on  the  title  the  mort- 
gagee then  has,  and  when  it  is  removed  his  title  becomes  clear  and 
perfect  {Phelps  v.  Sage,  2  Day,  151;  Roath  v.  Smith,  5  Conn.  136; 
Chamberlin  v.  Thompson,  10  id.  244;  Porter  v.  Seeley,  13  id.  564; 
Smith  V.  Vincent,  15  id.  1;  Doton  v.  Russell,  17  id.  146;  Cross  v. 
Robinson,  21  id.  379;  Dudley  v.  Caldwell,  19  id.  218;  Colwell  v. 
Warner,  36  id.  224). 

What  effect  would  such  a  decree  produce  upon  a  mortgage  like 
the  one  under  consideration,  where  the  legal  title  remains  in  the 
mortgagor,  and  nothing  but  a  pledgee's  interest  is  in  the  mort- 
gagee, even  after  the  debt  becomes  due?  It  could  only  extinguish 
the  right  of  redemption,  if  it  could  do  that.  It  could  not  give  the 
mortgagee  the  right  of  possession  of  the  property,  for  the  mort- 
gagor has  still  the  legal  title,  which  carries  with  it  the  right  of  pos- 
session. It  would  require  another  proceeding  in  equity,  to  say  the 
least,  to  dispossess  him  of  that  title,  and  vest  it  in  the  mortgagee. 
Hence  it  is  clear  that  full  redress  cannot  be  given  the  plaintiff  in 
this  proceeding. 

But  the  plaintiff  has  a  lien  on  the  property  in  the  nature  of  a 
pledge  to  secure  payment  of  the  mortgage  debt.    And  although  our 


DOLLIVER    V.    ST,    JOSEPH    INSURANCE    CO.  287 

remedy  of  strict  foreclosure  may  not  be  adapted  to  give  redress  to 
the  plaintiff  through  the  medium  of  such  a  lien,  still  a  court  of 
equity  can  devise  a  mode  that  will  be  appropriate;  for  it  would 
be  strange  if  a  lawful  lien  upon  property  to  secure  a  debt  could  not 
be  enforced  according  to  its  tenor  by  a  court  of  chancery.  It  is  said 
that  every  wrong  has  its  remedy;  so  it  maj^  be  said  that  every  case 
requiring  equitable  relief  has  its  corresponding  mode  of  redress. 
We  have  no  doubt  that  a  court  of  equity  has  the  power  to  subject 
the  property  in  question  to  the  payment  of  this  debt,  upon  a  proper 
complaint  adapted  to  the  purpose.  When  personal  property  is 
pledged  to  secure  the  payment  of  a  debt,  it  may  be  taken  and  sold, 
that  payment  may  be  made,  after  giving  the  pledgor  a  reasonable 
opportunity  for  redemption.  So  here,  we  think  a  similar  course 
might  be  taken  with  this  property.  Such  a  course  would  fall  in 
with  the  original  intent  of  the  parties,  and  with  the  civil  code  and 
mode  of  procedure  of  the  State  of  New  York.  Modes  of  redress 
in  that  State  have  of  course  no  force  in  this  State,  but  such  a  mode 
of  procedure  seems  to  be  adapted  to  a  case  of  this  character. 

And  we  further  think  that  on  an.  amended  complaint,  setting 
forth  all  the  essential  facts,  and  praying  that  if  there  shall  be  a 
default  in  redeeming  the  property  during  such  time  as  the  court 
shall  allow  for  redemption,  then  the  right  of  redemption  shall  be 
forever  foreclosed,  and  the  legal  title  and  possession  of  the  property 
be  decreed  in  the  mortgagee,  such  course  might  be  taken. 

We  think  either  of  the  modes  suggested  might  be  pursued;  but 
inasmuch  as  the  course  which  has  been  taken  leaves  the  legal  title 
and  possession  of  the  property  in  the  mortgagor,  we  think  the  court 
erred  in  holding  the  complaint  sufficient,  and  in  passing  the  decree 
thereon. 

There  is  error  in  the  judgment  appealed  from,  and  it  is  reversed, 
and  the  case  remanded. 

In  the  opinion  the  other  judges  concurred. 


DoLLivER  V.  St.  Joseph. Insurance  Co.,  128  Mass.  315  (1880). 
A  mortgagor  of  real  property  insured  the  same  under  a  policy, 
wherein  he  represented  himself  as  having  "the  entire,  uncondi- 
tional and  sole  ownership"  of  the  property.  It  was  held  that  there 
was  no  misrepresentation. 

SouLE,  J.  It  has  long  been  settled  in  this  Commonwealth  that, 
as  to  all  the  world  except  the  mortgagee,  a  mortgagor  is  the  owner 
of  the  mortgaged  lands,  at  least  till  the  mortgagee  has  entered  for 


288  COMMON    LAW    RELATIONS 

possession  (Willington  v.  Gale,  7  Mass.  138;  Waltham  Bank  v. 
Waltham,  10  Met.  334;  White  v.  Whitney,  3  Met.  81;  Ewer  v. 
Hobhs,  5  Met.  1;  Henry's  case,  4  Cush.  257;  Howard  v.  Robinson, 
5  Cush.  119;  Buffum  v.  Bowditch  Ins.  Co.,  10  Cush.  540;  Farns- 
worth  V.  Boston,  126  Mass.  1).  This  being  the  law,  and  the  mort- 
gagees not  being  in  possession  of  the  premises,  the  plaintiff's 
assignor  might  well  be  described  in  a  policy  of  insurance  as  the 
owner  of  the  property  insured;  and,  inasmuch  as  his  estate  was 
in  fee  simple,  not  an  estate  for  life,  and  not  a  base,  quahfied  or 
conditional  fee,  it  might  well  be  described  as  the  entire  and  uncon- 
ditional ownership;  and  as  he  had  no  joint  tenant  nor  tenant  in 
common,  his  estate  was  well  described  as  the  sole  ownership.  As 
between  him  and  the  defendant,  the  mortgages  and  the  lease  were 
mere  incumbrances  on  his  title,  not  affecting  its  character  as  entire, 
and  not  changing  it  from  an  absolute  to  a  conditional  estate  or 
ownership.  Even  as  between  him  and  the  mortgagees,  the  mort- 
gagees' estate  was  the  conditional  one,  determinable  by  satisfac- 
tion of  the  condition  set  out  in  the  mortgage  deed.  There  was  no 
joint  tenancy  nor  tenancy  in  common  of  the  mortgagor  and  the 
mortgagees.  All  the  characteristics  of  such  tenancies  are  lacking  in 
their  relations  to  the  property.^ 

1  Compare  Blaney  v.  Bearce,  2  Greenl.  (Me.)  132  (1822). 


CHAPTER  I.    (Continued) 
Section  II. — Possession 

KEECH  V.   HALL 

Court  of  King's  Bench,  1778 

(1  Douglas,  21) 

Ejectment  tried  at  Guildhall  before  BuUer,  Justice,  and  verdict 
for  the  plaintiff.  After  a  motion  for  a  new  trial,  or  leave  to  enter 
up  judgment  of  nonsuit,  and  cause  shown,  the  court  took  time  to 
consider;  and  now  Lord  Mansfield  stated  the  case  and  gave  the 
opinion  of  the  court,  as  follows: 

Lord  Mansfield.  This  is  an  ejectment  brought  for  a  ware-i 
house  in  the  city  by  a  mortgagee  against  a  lessee  under  a  lease  in 
writing  for  seven  years,  made  after  the  date  of  the  mortgage  bv 
the  mortgagor,  who  had  continued  in  possession.  The  lease  was 
at  a  rack-rent.  The  mortgagee  had  no  notice  of  the  lease,  nor_  the 
Jessee  any  notice  ofthe  mortgagee.  I'He  det'eiKlant~offered  to  attorn 
to  the  mortgagee  before  the  ejectment  was  brought.  The  plaintiff 
is  willing  to  suffer  the  defendant  to  redeem.  There  was  no  notice  to 
quit;  so  that,  though  the  written  lease  should  be  bad,  if  the  lessee 
is  to  be  considered  as  tenant  from  year  to  year,  the  plaintiff  must 
fail  in  this  action.  The  question,  therefore,  for  the  court  to  decide 
is  whether,  by  the  agreement  understood  between  mortgagors  and 
mortgagees,  which  is  that  the  latter  shall  receive  interest  and  the 
former  keep  possession,  the  mortgagee  has  given  an  imphed  author- 
ity to  the  mortgagor  to  let  from  year  to  year  at  a  rack-rent;  orl 
whether  he  may  not  treat  the  defendant  as  a  trespasser,  disseisor  j 
and  wrongdoer. 

No  case  has  been  cited  where  this  question  has  been  agitated, 
much  less  decided.  The  only  case  at  all  hke  the  present,  is  one 
that  was  tried  before  me  on  the  home  circuit  (Belchier  v.  Collins) ; 
but  there  the  mortgagee  was  privy  to  the  lease,  and  afterwards, 
by  a  knavish  trick,  wanted  to  turn  the  tenant  out.     I  do  not 

289 


290  COMMON    LAW   RELATIONS 

wonder  that  such  a  case  has  not  occurred  before.  Where  the  lease 
is  not  a  beneficial  lease,  it  is  for  the  interest  of  the  mortgagee  to 
continue  the  tenant;  and  where  it  is,  the  tenant  may  put  himself 
in  the  place  of  the  mortgagor,  and  either  redeem  himself  or  get 
a  friend  to  do  it.  The  idea  that  the  question  may  be  more  proper 
for  a  court  of  equity  goes  upon  a  mistake.  It  emphatically  be- 
longs to  a  court  of  law,  in  opposition  to  a  court  of  equity;  for  a 
lessee  at  a  rack-rent  is  a  purchaser  for  a  valuable  consideration, 
and  in  every  case  between  purchasers  for  a  valuable  consideration, 
a  court  of  equity  must  follow,  not  lead,  the  law.  On  full  considera- 
tion, we  are  all  clearly  of  opinion  that  there  is  no  inference  of  fraud 
or  consent  against  the  mortgagee  to  prevent  him  from  considering 
the  lessee  as  a  wrongdoer.  It  is  rightly  admitted  that  if  the  mort- 
gagee had  encouraged  the  tenant  to  lay  out  money  he  could  not 
maintain  this  action;  but  here  the  question  turns  upon  the  agree- 
ment between  the  mortgagor  and  mortgagee;  when  the  mort- 
gagor is  left  in  possession,  the  true  inference  to  be  drawn  is  an 
agreement  that  he  shall  possess  the  premises  at  will  in  the  strictest 
sense,  and,  therefore,  no  notice  is  ever  given  him  to  quit,  and  he 
is  not  even  entitled  to  reap  the  crop,  as  other  tenants  at  will 
are,  because  all  is  liable  to  the  debt,  on  payment  of  which  the 
mortgagee's  title  ceases.  The  mortgagor  has  no  power,  express  or 
implied,  to  let  leases  not  subject  to  every  circumstance  of  the 
mortgage.  If  by  implication  the  mortgagor  had  such  a  power,  it 
must  go  to  a  great  extent,  to  leases  where  a  fine  is  taken  on  a  re- 
newal for  lives.  The  tenant  stands  exactly  in  the  situation  of  the 
mortgagor.  The  possession  of  the  mortgagor  cannot  be  considered 
as  holding  out  a  false  appearance.  It  does  not  induce  a  belief  that 
there  is  no  mortgage,  for  it  is  the  nature  of  the  transaction  that 
the  mortgagor  shall  continue  in  possession.  Whoever  wants  to  be 
secure  when  he  takes  a  lease  should  inquire  after  and  examine  the 
title  deeds.  In  practice,  indeed  (especially  in  the  case  of  great 
estates)  that  is  not  often  done,  because  the  tenant  reHes  on  the 
honour  of  his  landlord ;  but  whenever  one  of  two  innocent  persons 
must  be  a  loser,  the  rule  is  qui  prior  est  tempore,  potior  est  jure. 
If  one  must  suffer,  it  is  he  who  has  not  used  due  diligence  in  look- 
ing into  the  title. 

It  was  said  at  the  bar  that  if  the  plaintiff,  in  a  case  Uke  this, 
can  recover,  he  will  also  be  entitled  to  the  mesne  profits  from  the 
tenant  in  an  action  of  trespass,  which  would  be  a  manifest  hardship 
and  injustice,  as  the  tenant  would  then  pay  the  rent  twice.  I 
give  no  opinion  on  that  point;  but  there  may  be  a  distinction,  for 


MOSS    V.    GALLIMORE  291 

the  mortgagor  may  be  considered  as  receiving  the  rents  in  order  to 
pay  the  interest  by  an  implied  authority  from  the  mortgagee,  till 
he  determine  his  will.  As  to  the  lessee's  right  to  reap  the  crop 
which  he  may  have  sown  previous  to  the  determination  of  the  will 
of  the  mortgagee,  that  point  does  not  arise  in  this  case,  the  eject- 
ment being  for  a  warehouse;  but,  however  that  may  be,  it  could 
be  no  bar  to  the  mortgagee's  recovering  in  ejectment.  It  would 
only  give  the  lessee  a  right  of  ingress  and  egress  to  take  the  crop; 
as  to  which,  with  regard  to  tenants  at  will,  the  text  of  Littleton 
is  clear.-^  We  are  all  clearly  of  opinion  that  the  plaintiff  is  entitled 
to  judgment. 

The  rule  discharged. 


MOSS  V.   GALLIMORE 
Court  of  King's  Bench,  1779 

(1  Douglas,  279) 

In  an  action  of  trespass,  which  was  tried  before  Nares,  Justice,  at 
the  last  Assizes  for  Staffordshire,  on  not  guilty  pleaded,  a  verdict 
was  found  for  the  plaintiff,  subject  to  the  opinion  of  the  court  on 
a  case  reserved.  The  case  stated  as  follows:  One  Harrison,  being 
seised  in  fee,  on  the  1st  of  January,  1772,  demised  certain  premises 
to  the  plaintiff  for  twenty  years,  at  the  rent  of  £40,  payable  yearly 
on  the  12th  of  May;  and,  in  May,  1772,  he  mortgaged  the  same 
premises,  in  fee,  to  the  defendant,  Mrs.  Gallimore.  Moss  continued 
in  possession  from  the  date  of  the  lease,  and  paid  his  rent  regularly 
to  the  mortgagor,  all  but  £28  which  was  due  on  and  before  the 
month  of  November,  1778,  when  the  mortgagor  became  a  bankrupt, 
being,  at  the  time,  indebted  to  the  mortgagee  in  more  than  that 
sum  for  interest  on  the  mortgage.  On  the  3d  of  January,  1779, 
one  Harwar  went  to  the  plaintiff,  on  behalf  of  Gallimore,  shewed 
him  the  mortgage  deed,  and  demanded  for  him  the  rent  then 
remaining  unpaid.  This  was  the  first  demand  that  Gallimore 
made  of  the  rent.  The  plaintiff  told  Harwar  that  the  assignees  of 
Harrison  had  demanded  it  before,  viz,  on  the  31st  of  December; 
but,  when  Harwar  said  that  Gallimore  would  distrain  for  it  if  it 
was  not  paid,  he  said  he  had  some  cattle  to  sell,  and  hoped  she 
w^ould  not  distrain  till  they  were  sold,  when  he  would  pay  it.  The 
plaintiff  not  having  paid  according  to  this  undertaking,  the  other 

1  Lit.,  §  68.    See  also  Co.  Lit.,  55  a,  55  h. 


292  COMMON    LAW   RELATIONS 

defendant,  by  order  of  Gallimore,  entered  and  distrained  for  the 
rent,  and  thereupon  gave  a  written  notice  of  such  distress  to  the 
plaintiff,  in  the  following  words:  "Take  notice,  that  I  have  this 
day  seized  and  distrained,  &c.  by  virtue  of  an  authority,  &c.  for  the 
sum  of  £28,  being  rent,  and  arrears  of  rent,  due  to  the  said  Ester 
Gallimore,  at  Michaelmas  last  past,  for,  &c.  and  unless  you  pay  the 
said  rent,  &c."  He  accordingly  sold  cattle  and  goods  to  the  amount 
of  £22  2s.  The  question  stated  for  the  opinion  of  the  court  was 
Whether,  under  all  the  circumstances,  the  distress  could  be  justi- 
fied? 

Lord  Mansfield.  I  think  this  case,  in  its  consequences,  very 
material.  It  is  the  case  of  lands  let  for  years  and  afterwards  mort- 
gaged, and  considerable  doubts,  in  such  cases,  have  arisen  in  re- 
spect to  the  mortgagee,  when  the  tenant  colludes  with  the  mort- 
gagor; for,  the  lease  protecting  the  possession  of  such  a  tenant,  he 
cannot  be  turned  out  by  the  mortgagee.  Of  late  years  the  courts 
have  gone  so  far  as  to  permit  the  mortgagee  to  proceed  by  eject- 
ment, if  he  has  given  notice  to  the  tenant  that  he  does  not  intend 
to  disturb  his  possession,  but  only  requires  the  rent  to  be  paid  to 
him,  and  not  to  the  mortgagor.  This,  however,  is  entangled  with 
difficulties.  The  question  here  is,  whether  the  mortgagee  was  or 
was  not  entitled  to  the  rent  in  arrear.  Before  the  statute  of  Queen 
Anne,  attornment  was  necessary,  on  the  principle  of  notice  to  the 
tenant;  but,  when  it  took  place,  it  certainly  had  relation  back  to 
the  grant  and,  Hke  other  relative  acts,  they  were  to  be  taken  to- 
gether. Thus  livery  of  seisin,  though  made  afterwards,  relates 
to  the  time  of  the  feoffment.  Since  the  statute,  the  convey- 
ance is  complete  without  attornment,  but  there  is  a  provision, 
J:hat  the  tenant  shall  not  be  prejudiced  fofany  "act  done  by 
him,  as  lioldmg  under_the  grantor,  till  he  has  had  notice  of  the 
Heed,  iheretore^^e  pa3niient  of  rent  before  such  notice  'is 
good.  With  this  protection  he  is  to  be^'COnsidered,  by  force 
ot  the  statute,  as  having  attorned  at  the  time  of  the  execution 
of  the  grant;  and,  here,  the  tenant  has  sulTered  no  injury.  No  rent 
has  been  demanded  which  was  paid  before  he  knew  of  the  mort- 
gage. He  had  the  rent  in  question  still  in  his  hands,  and  was  bound 
to  pay  it  according  to  the  legal  title.  But,  having  notice  from  the 
assignees  and  also  from  the  mortgagee,  he  dares  to  prefer  the 
former,  or  keeps  both  parties  at  arm's  length.  In  the  case  of 
execution  it  is  uniformly  held  that  if  you  act  after  notice,  you  do  it 
at  your  peril.    He  did  not  offer  to  pay  one  of  the  parties  on  receiv- 


MOSS    V.    GALLLMOKi:  293 

ing  an  indemnity.  As  between  the  assignees  and  the  mortgagee, 
let  us  see  who  is  entitled  to  the  rent.  The  assignees  stand  exactly 
in  the  place  of  the  bankrupt.  Now,  a  mortgagor  is  not  properly 
tenant  at  will  to  the  mortgagee,  for  he  is  not  to  pay  him  rent.  He 
is  so  only  quodam  modo.  Nothing  is  more  apt  to  confound  than  a 
simile.  When  the  court,  or  counsel,  call  a  mortgagor  a  tenant  at 
will,  it  is  barely  a  comparison.  He  is  like  a  tenant  at  will.  Thel 
mortgagor  receives  the  rent  by  a  tacit  agreement  with  the  mort-', 
gagee,  but  the  mortgagee  may  put  an  end  to  this  agreement  when;' 
he  pleases.  He  has  the  legal  title  to  the  rent,  and  the  tenant,  iii 
the  present  case,  cannot  be  damnified,  for  the  mortgagor  can  never\ 
oblige  him  to  pay  over  again  the  rent,  which  has  been  levied  by 
this  distress.  I  therefore  think  the  distress  well  justified;  and  I 
consider  this  remedy  as  a  very  proper  additional  advantage  to 
mortgagees,  to  prevent  collusion  between  the  tenant  and  the 
mortgagor.  i 

AsHHURST,  Justice.  The  statute  of  Queen  Anne  has  rendered 
attornment  unnecessary  in  all  cases,  and  the  only  question  here 
arises  upon  the  circumstance  of  the  notice  of  the  mortgage  not 
having  been  given  till  after  the  rent  distrained  for  became  due. 
Where  the  mortgagor  is  himself  the  occupier  of  the  estate,  he  may 
be  considered  as  tenant  at  will;  but  he  cannot  be  so  considered,  if 
there  is  an  undertenant;  for  there  can  be  no  such  thing  as  an  under- 
tenant to  a  tenant  at  will.  The  demise  itself  would  amount  to 
a  determination  of  the  will.  There  being  in  this  case  a  tenant  in 
possession,  the  mortgagor  is,  therefore,  only  a  receiver  of  the 
rent  for  the  mortgagee,  who  may,  at  any  time,  countermand  the 
implied  authority,  by  giving  notice  not  to  pay  the  rent  to  him  any 
longer. 

BuLLER,  Justice.  There  is  in  this  case  a  plea  of  the  general  issue, 
which  is  given  by  statute  (11  Geo.  2,  c.  19,  §  21),  but  if  the  justifica- 
tion appeared  upon  the  record  in  a  special  plea,  the  distress  must 
be  held  to  be  legal.  Before  the  act  of  Queen  Anne,  in  a  special 
justification,  attornment  must  have  been  pleaded.  But  since  that 
statute,  it  is  never  averred  in  a  declaration  in  covenant,  nor  pleaded 
in  an  avowry.  In  the  case  of  Keech  v.  Hall,  referred  to  by  Mr. 
Wood,  the  court  did  not  consider  the  mortgagor  as  tenant  at  will 
to  all  purposes.  If  my  memory  do  not  fail  me,  my  lord  distin- 
guished mortgagors  from  tenants  at  will  in  a  very  material  circum- 
stance, namely,  that  a  mortgagor  would  not  be  entitled  to  emble- 


294 


COMMON    LAW   RELATIONS 


merits.    Expressions  used  in  particular  cases  are  to  be  understood 
with  relation  to  the  subject-matter  then  before  the  court. 
The  postea  to  be  delivered  to  the  defendants.^ 


JONES  V.   CLARK 

Supreme  Court  of  Judicature  of  New  York,  1822 

(20  Johns.  51) 

In  error,  to  the  Court  of  Common  Pleas,  or  Mayor's  Court,  of 
Albany. 

The  defendants  in  error  brought  an  action  of  assumpsit  against 
the  plaintiff  in  error,  in  the  court  below,  to  recover  one  quarter's 
rent  of  a  house  and  lot,  formerly  owned  by  Gilbert  Stewart,  due 
August  1,  1821.  The  defendant  pleaded  the  general  issue.  At 
the  trial,  the  plaintiffs  gave  in  evidence  a  written  lease  of  the 
premises  from  them  to  the  defendant  and  Maltby  Howel,  for  one 


'  In  Birch  v.  Wright,  1  T.  R.  378, 
this  case  was  confirmed  by  the  court, 
and  fully  re-stated  by  Duller,  J., 
who  declared  by  Lord  Mansfield's 
desire  that  his  Lordship  continued 
satisfied  with  the  decision.  In  that 
case  it  was  determined  that  the 
grantee  of  a  reversion,  in  trust  for 
payment  of  an  annuity,  might  re- 
cover in  an  action  for  use  and  occupa- 
tion  against  a  tenant  from  year  to 
year,  who  came  in  under  the  grantor 
before  the  grant,  all  the  rent  unpaid 
in  his  hands  at  the  time  of  notice  of 
the  grant. — Rep. 

Thunder  v.  Belcher,  3  East,  449 
(1803),  accord.  See  sXso,  Partridge  v. 
Bere,  h  B.  &  Aid.  604  (1882). 

In  King  v.  Housatonic  R.  Co.,  45 
Conn.  226  (1877),  Hovey,  J.,  said: 
"Where  the  grant  is  by  way  of 
mortgage,  the  mortgagee,  though 
entitled  to  the  rents  as  incident  to 
the  reversion,  may  take  them  or  not 
at  his  election.  If  he  elects  not  to 
take  them,  as  he  generally  does  so 
long  as  his  interest  is  paid,  he  may 


forbear  to  give  notice  to  the  tenant, 
and  in  that  case  the  mortgagor  is 
authorized  to  coUect  the  rents  and 
appropriate  them  to  his  own  use. 
But  if  the  mortgagee  elects  to  take 
the  rents  and  gives  notice  of  his 
election  to  the  tenant,  he  then  be- 
comes entitled  to  all  the  rents  accru- 
ing after  the  execution  of  the  mort- 
gage and  in  arrear  and  unpaid  at  the 
time  of  the  notice,  as  well  as  to  those 
which  accrue  afterwards.  But  the 
rents  in  arrear  at  the  time  the  mort- 
gage was  executed  belong  to  the 
mortgagor.  The  leading  authority 
for  this  doctrine  is  the  case  of  Moss  v. 
Gallimore,  1  Doug.  279."  See  also, 
Baldwin  v.  Walker,  21  Conn.  168 
(1851);  Abbott  v.  Hanson,  24  N.  J. 
Law,  493  (18.54);  Riissell  v.  Allen, 
2  Allen  (Mass.),  42  (1861),  and 
Mirick  v.  Hoppin,  118  Mass.  582 
(1875),  accord.  So,  after  forfeiture, 
McKircher  v.  Hawley,  16  Johns. 
(N.  Y.)  289  (1819),  semble.  But 
compare  Myers  v.  White,  1  Rawle 
(Penn.),  355  (1829)  {semble),  contra. 


JONES   V.    CLARK  295 

year,  ending  May  1,  1821,  for  the  rent  of  400  dollars,  payable 
quarterly. 

M.  Howel,  a  witness  for  the  plaintiff,  testified  that  the  defend- 
ant took  possession  of  the  premises,  under  the  said  lease,  at  its 
commencement,  on  the  first  of  May,  1820,  and  has  since  continued 
in  occupation  thereof.  The  witness,  in  answer  to  a  question,  which 
was  objected  to  by  the  defendant's  counsel,  but  allowed  by  the 
court,  and  the  point  reserved,  said  that  he  joined  in  the  execution 
of  the  lease  merely  as  surety  for  the  payment  of  the  rent  by  the 
defendant,  Jones,  and  had  never  occupied  the  premises.  It  was 
proved  that,  at  the  expiration  of  the  term,  Jones,  without  the  inter- 
vention or  concurrence  of  Howel,  agreed  with  Clark,  one  of  the 
plaintiffs  below,  to  take  the  premises  for  another  year,  at  the  same 
rent. 

The  defendant  below  gave  in  evidence  a  bond  of  Gilbert  Stewart 
to  R.  Pratt  and  W.  Durant,  for  6000  dollars,  payable  on  the  4th  of 
February,  1821,  and  a  mortgage  to  them  of  the  premises,  dated 
February  4,  1819,  duly  recorded;  and  also  a  lease  from  Pratt  and 
Durant,  to  the  defendant,  of  the  premises  in  question,  dated  Febru- 
ary 7,  1821,  for  one  year,  commencing  May  1,  1821,  at  the  yearly 
rent  of  400  dollars;  which  lease  contained  a  clause,  by  which  the 
lessors  engaged  to  indemnify  the  defendant  against  all  claims  for 
rent  by  any  other  persons;  and  also  a  general  assignment  by  Gilbert 
Stewart  of  all  his  property,  including  the  premises  in  question,  to 
the  plaintiffs  below,  dated  August,  1819,  in  trust  for  the  benefit 
of  his  creditors,  as  specified  in  the  assignment. 

A  verdict  was  taken  by  consent,  for  the  plaintiffs  below,  for  one 
quarter's  rent,  subject  to  the  opinion  of  the  court,  &c.,  on  which 
a  judgment  was,  afterwards,  rendered  by  the  court  below. 

Spencer,  Ch.  J.,  delivered  the  opinion  of  the  court.  The  points 
made  by  the  counsel  for  the  plaintiff  in  error,  are,  1.  That  there 
was  no  sufficient  evidence  that  Jones  held  under  Clark  and  Stewart. 

2.  That  Howel  was  an  incompetent  witness. 

3.  That  the  matters  shown  by  the  defendant  below  were  a  com- 
plete defence. 

The  first  and  second  points  may,  at  once,  be  disposed  of.  There 
was  complete  evidence  of  the  hiring  of  the  premises  by  Jones,  for 
the  second  year.  Howel  was  a  competent  witness  to  show  that  he 
had  no  beneficial  interest  in  the  expired  lease,  though  the  fact  itself 
was  no  wise  material.  The  cause  depends  on  the  third  point;  and 
it  presents  this  question,  whether  a  tenant  of  the  mortgagor  in 


296  COMMON    LAW   RELATIONS 

j:)Q8sessiQii»^nd  j^?]iaJ3eeame^^U£]isubsequent  to  the  giving  the  mort- 
gage^_can.  in  a  suit  Ijv  liis  landlord,  1h(3  mortgagor,  set  up  as  alegaf 
defence,  that  aftei-  tlie  mortgage  became  forfeited  he  attorned  to^ 
the  niortgagee  and  took  a  lease  froni  him,  during  the  continuance 
of  the  lease  from  the  mortgagor.  This  case  has  probably  been 
decfded  in  the  court  below  on  the  authority  of  the  case  of  M'Kircher 
V.  Hawley,  16  Johns.  Rep.  289.  The  principle  decided  in  that  case 
was  this:  that  a  mortgagee  could  not  distrain  for  rent  becoming 
due  under  a  lease  made  by  the  mortgagor  subsequent  to  giving  the 
mortgage,  because  there  was  no  privity  of  estate  or  contract  be- 
tween the  mortgagee  and  such  a  tenant;  and  we  held  that,  to  ena})le 
a  party  to  distrain  for  rent,  he  must  have  a  concurrent  right  to 
maintain  an  action  for  the  rent;  and  if  there  was  no  privity  of  con- 
tract or  estate,  an  action  could  not  be  maintained. 

When  the  plaintiff  in  error  attorned  to  the  mortgagees  and  took 
a  lease  from  them,  their  title  to  enter  under  their  mortgage  was 
complete;  for,  the  day  of  payment  having  passed,  the  condition 
was  broken,  and  the  estate  of  the  mortgagees  was  absolute  at  law. 
This  case,  then,  presents  a  very  different  question  from  the  one 
decided  in  M  Kircher  v.  Hawley.  There  the  point  was  whether 
the  mortgagee  could  distrain,  or,  in  effect,  sue  for  the  rent.  Here 
it  is  whether  the  tenant  of  the  mortgagor  could  not,  by  his  own 
act  and  consent,  become  the  future  tenant  of  the  mortgagees,  with- 
out any  disloyalty  to  the  mortgagor.  "At  common  law,"  says 
Mr.  Butler  (in  note  272  to  Co.  Litt.  309  a),  "attornment  signified 
only  the  consent  of  the  tenant  to  t\\e  grant  of  the  seigniory;  or,  in 
other  words,  his  consent  to  become  the  tenant  of  the  new  lord." 
He  goes  on  to  show  the  operation  of  the  statute  of  quia  emptores, 
and  the  statute  of  uses,  and  the  statute  of  wills,  and  observes  that 
the  necessity  and  efficacy  of  attornments  have  been  almost  totally 
taken  away  by  the  statutes  of  4  and  5  Anne,  c.  16,  and  11  George 
II,  c.  19.  These  two  statutes  have  been  re-enacted  here.  The 
former  does  not  relate  to  this  case,  but  the  latter  has  an  important 
and  decisive  bearing  upon  it.  The  28th  section  of  the  statute  con- 
cerning distresses,  rents,  and  the  renewal  of  leases  (1  N.  R.  L.  443), 
after  reciting  that  the  possession  of  estates  is  rendered  precarious 
by  the  frequent  and  fraudulent  practice  of  tenants  attorning  to 
strangers,  by  which  means  landlords  and  lessors  are  turned  out  of 
possession,  and  put  to  the  difficulty  and  expense  of  recovering 
possession  by  suits  at  law,  enacts  that  every  such  attornment  shall 
be  null  and  void,  and  the  possession  of  the  landlords  or  lessors  shall 
not  be  deemed  to  be,  in  any  wise,  changed  by  any  such  attornment; 


NEW  YORK  REAL  PROPERTY  LAW  297 

with  a  proviso  that  nothing  therein  contained  should  extend  to 
vacate  or  affect  any  attornment  made  pursuant  to  and  in  conse- 
quence of  any  judgment  at  law,  or  decree  or  order  of  a  court  of 
equity,  or  made  with  the  privity  and  consent  of  the  landlord  or 
lessor,  or  to  any  mortgagee  after  the  mortgage  is  become  forfeited. 

The  mischief  which  the  statute  was  intended  to  remedy  was  the 
attornment  by  tenants  to  strangers,  claiming  title;  and,  without  the 
proviso,  the  construction  of  the  enacting  part  of  the  statute  would 
have  admitted  of  no  doubt.  But,  to  remove  every  doubt,  the  legis- 
lature have  declared  who  were  not  strangers,  and  to  whom  the 
tenant  might  lawfully  attorn;  he  may  attorn  to  a  mortgagee  after 
the  mortgage  is  forfeited.  The  reason  of  this  is  obvious.  The  mort- 
gagee, as  between  him  and  the  mortgagor,  has  the  right  of  entry, 
and  is  entitled  to  the  possession  of  the  premises.  If,  then,  the 
tenant  will  do  voluntarily  what  the  law  will  coerce  him  to  do,  yield 
up  the  possession  to  the  mortgagee,  it  is  not  an  act  injurious  to 
the  just  rights  of  the  mortgagor,  nor  disloyal  towards  him.  Indeed, 
the  rights  of  the  tenant  also  require  that  he  should  be  allowed  to 
do  so;  for,  if  he  refuses  to  attorn,  he  at  once  subjects  himself  to 
eviction  and  the  payment  of  costs.  The  statute  makes  no  differ- 
ence between  a  tenant  to  the  mortgagor,  who  becomes  so  before  or 
after  the  execution  of  the  mortgage.  It  applies  to  every  tenant  of 
the  mortgagor,  without  reference  to  the  time  when  he  became 
tenant.  The  reason  is  the  same  in  both  cases,  and  they  are  both 
embraced  by  the  proviso  of  the  statutes;  and  neither  of  them 
are  within  the  mischiefs  intended  by  the  enacting  part  of  the 
statute. 

Judgment  reversed,  and  a  venire  de  novo  to  be  awarded  in  the 
court  below.  ^ 

New  York  Real  Property  Law,  §  224.  Attornment  by  tenant 
The  attornment  of  a  tenant  to  a  stranger  is  absolutely  void,  and 
does  not  in  any  way  affect  the  possession  of  the  landlord  unless 
made  either: 

1.  With  the  consent  of  the  landlord;  or, 

'  Magill  v.  Hinsdale,  6  Conn.  464  the  efficacy  of  attornment  of  tenant 

(1827),  accord.    Compare  McKircher  to  mortgagee,  in  New  Jersey,  under 

V.   Hawley,   16  Johns.    (N.   Y.)   289  the  statute  (Gen.  Stat.  [1896]  1920, 

(1819),  and  see  Hogsett  v.  Ellis,  17  §26).     The  early  case  of  Soiiders  v. 

Mich.  351  (1868),  contra.  VanSickle,  .3  Halst.  313  [386]  (1826) 

See  also.  Price  v.  Smith,  1  Green  "  was  reversed  by  the  Court  of  Errors, 

Ch.   516    (1838),   and  Sanderson   v.  November  term,  1832."— Halst.  N.  J. 

Price,  1  Zabr.  637  (1846),  recognizing  Dig.,  Tenant,  10. 


298 


COMMON    LAW   RELATIONS 


2.  Pursuant  to  or  in  consequence  of  a  judgment,  order,  or  decree 
of  a  court  of  competent  jurisdiction;  or, 

3.  To  a  mortgagee,  after  the  mortgage  has  become  for- 
feited.^ 

Maine  Rev.  Stat.  (1883),  chap.  90,  §  2.  A  mortgagee,  or 
person  claiming  under  him,  may  enter  on  the  premises,  or  recover 
possession  thereof,  before  or  after  breach  of  condition,  when  there 
is  no  agreement  to  the  contrary;  but  in  such  case,  if  the  mortgage 
is  afterwards  redeemed,  the  amount  of  the  clear  rents  and  profits 
from  the  time  of  taking  possession  shall  be  accounted  for  and  de- 
ducted from  the  sum  due  on  the  mortgage. 


Mass.  Pub.  Stat.  (1882),  chap.  181,  §  10.  Nothing  contained 
in  this  chapter  shall  prevent  a  mortgagee  or  any  person  claiming 
under  him  from  entering  on  the  premises  or  from  recovering 
possession  thereof  before  breach  of  the  condition  of  the  mortgage, 
when  there  is  no  agreement  to  the  contrary. 


1  To  the  same  effect  are  New 
Jersey  Gen.  Stat.  (1896),  p.  1920, 
§  26,  and  Missouri  Rev.  Stat.  (1889), 
§  6373. 

"It  is  claimed  that  the  attornment 
to  defendant  is  valid  under  section 
2013  of  the  Code,  which  is  as  follows: 
'The  attornment  of  a  tenant  to  a 
stranger  is  void,  unless  made  with 
the  consent  of  the  landlord,  or  pur- 
suant to  or  in  consequence  of  a  judg- 
ment at  law  or  in  equity,  or  to  a 
mortgagee  after  the  mortgage  has 
been  forfeited.'  It  is  claimed  that 
the  mortgage  to  Hamilton  was  for- 
feited by  the  non-paj-ment,  at  ma- 
turity, of  the  note  secured,  and  that 
thereupon  the  tenant  in  possession 
had  the  right  to  attorn  and  transfer 
the  constructive  possession  to  de- 
fendant. This  cannot  be  the  mean- 
ing of  this  section.  Under  such  a 
construction  all  the  decisions  of  this 
court  holding  that  the  legal  title 
and  right  to  possession  are  in  the 
mortgagor  until  after  foreclosure  and 
expiration  of  the  year  for  redemp- 


tion, could  be  evaded  and  nullified 
in  all  cases  where  the  mortgaged 
property  is  in  possession  of  a  tenant. 
The  decisions  relied  upon  by  ap- 
pellant were  based  upon  the  common 
law  idea  of  a  mortgage,  under  which, 
in  default  of  payment  at  the  time 
named,  the  mortgagee  was  entitled 
to  possession  of  the  mortgaged 
premises,  and  might  maintain  an 
action  of  ejectment  therefor.  We 
are  satisfied  that  under  this  section 
there  can  be  no  valid  attornment 
until  after  foreclosure  and  expiration 
of  the  period  of  redemption,  where 
the  property  is  sold  subject  to  re- 
demption.''— Per  Day,  J.,  in  Mills 
v.  Hatnilton,  49  la.  108  (1878).  See 
also  Mills  V.  Heaton,  52  la.  215 
(1879),  and  Code  (1897),  §  2990,  in 
which  the  ambiguity  is  removed. 
The  similar  provision  of  the  Wis- 
consin statute  (R.  S.  [1871]  1165,  §  1), 
apparently  interpreted  in  accordance 
with  Jones  v.  Clark,  supra,  has  also 
been  repealed.  Ann.  Stat.  (1889), 
§  2182. 


STONE    V.    PATTERSON  299 

Vermont  Stat.,  §  1498.  Every  mortgagor  shall,  until  condition 
broken,  have,  as  against  the  mortgagee,  the  legal  right  of  posses- 
sion to  the  mortgaged  premises,  unless  it  is  otherwise  stipulated  in 
the  mortgage  deed. 

N.  Y.  Code  Civ.  Proc.  Action  to  recover  real  property,  §  1498. 
A  mortgage,  or  his  assignee  or  other  representative,  cannot  main- 
tain such  an  action,  to  recover  the  mortgaged  premises.^ 


STONE  V.   PATTERSON 

Supreme  Judicial  Court  of  Massachusetts,  1837 

(19  Pick.  476) 

Assumpsit  for  rent  from  April  1st,  1835,  to  January  1st,  1836. 
'On  a  case  stated  it  appeared,  that  one  Knight,  being  the  owner  of 
the  premises,  subject  to  a  mortgage  to  one  French,  executed  a  lease 
of  the  same  to  the  defendant,  on  the  1st  of  April,  1835,  for  three 
years,  at  a  certain  rent  per  annum,  payable  quarterly;  that  the 
defendant  paid  Knight  a  part  of  the  rent  in  advance;  that  in  May, 
1835,  Knight  conveyed  the  premises  to  the  plaintiffs  in  fee,  subject 
to  the  mortgage  and  lease,  without  notice  of  such  pajmient  of  the 
rent  in  advance,  and  that  the  plaintiffs  notified  the  defendant  that 
he  must  pay  the  rent  to  them  as  it  should  become  due;  that  on  the 
20th  of  July,  1835,  the  mortgagee  took  possession  of  the  premises 
for  condition  broken,  but  without  notice  to  the  plaintiffs,  and 
ordered  the  defendant  to  pay  the  rent  to  him,  and  the  defendant 
thereupon  agreed  to  pay  it  to  him  from  that  time;  and  that  the  sum 
paid  in  advance  exceeded  the  rent  accruing  between  the  date  of  the 
lease  and  the  time  of  the  entry  by  the  mortgagee. 

Per  Curiam.  The  payment  of  rent  in  advance  was  a  vaUd  pay- 
ment and  a  good  discharge  pro  tanto  from  the  claim  of  the  lessor 
to  whom  payment  was  made,  and  is  a  good  bar  to  the  claim  of  the 
plaintiffs,  his  assignees.  The  case  of  Farley  v.  Thompson,  15  Mass. 
R.  18,  is  decisive  on  this  part  of  the  case.  It  has  been  argued  that 
the  assignees  ought  to  have  been  notified;  and  no  doubt  this  would 
have  been  necessary  if  the  rule  of  law  in  respect  to  negotiable 

»See  Barson  v.  Mulligan,  191  N.  Y.  306,  84  N.  E.  75  (1908). 


300  COMMON   LAW  RELATIONS 

securities  applied  to  the  assignments  of  leases;  but  these  assign- 
ments are  governed  by  the  well-known  rule  of  caveat  emptor.^ 

In  respect  to  the  other  portion  of  the  rent  claimed,  it  is  quite 
clear  that  the  defendant  was  bound  to  pay  it  to  French,  who  entered 
under  a  mortgage  made  previously  to  the  lease,  and  ordered  the 
rent  to  be  paid  to  him.  It  is  objected  that  this  entry  was  not  a  good 
entry  for  condition  broken,  because  no  notice  was  given  to  the 
plaintiffs.  But  it  is  immaterial  whether  it  was  a  good  entry  for 
the  purpose  of  foreclosure  or  not;  for  the  entry  was  lawful,  and  the 
mortgagee  thereby  became  possessed  of  the  premises,  and  might 
have  expelled  the  defendant  if  he  had  not  agreed  to  pay  rent  to  him. 
This  was  equivalent  to  an  actual  and  complete  ouster  or  eviction, 
as  was  decided  in  Fitchhurg  Manuf.  Corp.  v.  Melven,  15  Mass.  R. 
268,  and  in  Smith  v.  Shepard,  15  Pick.  147.  Such  an  ouster  or 
eviction  by  a  person  having  a  paramount  title  is  a  good  defence  to 
an  action  for  rent  by  the  lessor  or  those  claiming  under  him. 

Plaintiffs  nonsuit.'^ 


KIMBALL  V.   LOCKWOOD 

Supreme  Court  of  Rhode  Island,  1859 

(6  R.  I.  138) 

Debt  for  rent  of  a  shop  in  High  Street,  Providence,  wherein  the 
plaintiff  claimed  $150,  for  the  last  three  quarters  of  the  year 
elapsing  between  March  1,  1858,  and  March  1,  1859,  under  a  lease 
parol  by  him  made  to  the  defendants. 

The  case  was  submitted  to  the  court,  under  the  general  issue,  in 
fact  and  law;  and  it  appeared  that  the  late  Henry  Matthewson, 
being  the  owner  of  the  leased  premises,  in  his  lifetime  mortgaged 

3  See  Farley  v.  Thompson,  15  Mass.  Gray  v.  Gillespie,  59  N.  H.  469  (1879) ; 

18    (1818),    accord.      De    Nicholls    v  Comer  v.  Sheehan,  74  Ala.  452  (1883), 

Saunders,  5  C.  P.  589  (1870),  Cook  v.  accx)rd.     So,  after  condition  broken: 

Guerra,    7    C.    P.    132    (1872),    and  Vermont    Stat.,     §  1498;    Pierce    v. 

{semble)  Castleman  v.  Belt,  2  B.  Mon.  Brown,  24  Vt.  165  (1852);  Gartside  v. 

(Ky.)  157  (1841),  contra.  Outley,   58  111.  210   (1871)    (semble); 

*  Rockwell  V.  Bradley,  2  Conn.   1  or  for  the  purpose  of  enforcing  pay- 

(1816);    Wakeman   v.    Banks,   2   id.  ment:  New  Haven  Savings  Bank  v. 

446    (1818);    Blaney    v.    Bearse,    2  McPartland,  40  Conn.  90  (1873);  or 

Greenl.    (Me.)    132    (1822);    Den   v.  afi.-r  foreclo.sure:  Downard  v.  Graff, 

Stockton,  7  Halst.  (N.  J.)  322  (1831);  40  la.  597  (1875). 
Carroll  v.  Ballance,  26  111.  9  (1861); 


KIMBALL    V.    LOCKWOOD  301 

thorn  in  fee  to  his  son,  Henry  C.  Matthewson,  and  upon  his  death 
they,  with  other  real  estate,  came  into  the  possession  of  the  plaintiff, 
whose  wife  was  one  of  said  Matthewson 's  heirs  at  law;  that,  being 
thus  in  possession,  the  plaintiff  leased  the  shop  in  question  to  the 
defendants  by  parol,  from  March  1,  1858,  to  March  1,  1859,  at 
the  rent  of  $200  for  the  year,  payable  quarterly;  that  after  the 
death  of  his  father,  the  son's  mortgage  having  become  due,  on  the 
13th  day  of  May,  1858,  he  sued  the  plaintiff  in  ejectment  to  recover 
possession  of  the  estate  of  which  the  shop  in  question  was  a  tene- 
ment, and  gave  notice  to  the  defendants  to  pay  their  rent  to  him 
as  mortgagee ;  that  the  defendants,  having  offered  under  the  advice 
of  counsel  to  pay  rent  to  the  plaintiff  if  he  would  give  them  a  bond 
of  indemnity  against  the  claim  of  the  mortgagee,  which  he  did  not 
do,  promised  the  mortgagee  to  pay  the  rent  to  him,  and  did  pay  to 
him  the  last  three  quarters  rent,  accruing  from  the  first  day  of 
June,  1858,  to  the  first  day  of  March,  1859,  under  a  bond  of  in- 
demnity from  the  rnortgagee  against  the  claim  of  the  plaintiff,  to 
recover  which  rent,  after  such  payment,  this  action  was  brought. 
The  rent  of  the  quarter  during  which  notice  was  given  by  the 
mortgagee  to  the  defendants  to  pay  the  rent  to  him,  was  paid  by 
them  to  the  plaintiff. 

Ames,  C.  J.  It  seems  to  be  clear,  upon  principle,  and  is  wj 
settled  by  authority,  that  a  mortgage  by  the  lessorofjaads'mider 
lease,  operating  as  an  assignment  pn^UlUtO  of  t.liereversion,  carries 
the  rent  as  incident  to  it  to  the  mortgagee.  In  such  case,  therefore, 
all  that  the  law  requires  of  the  mortgagee  to  entitle  him  to  rent 
of  the  tenant  of  the  mortgagor,  is  notice  to  the  tenant  to  pay  the 
rent  to  him;  such  notice  preventing  any  injustice  to  the  tenant 
from  double  payment. 

If,  on  the  other  hand,  the  lease  be  subsequent  to  the  mortgage, 
as  the  mortgage  gives  to  the  mortgagee  no  title  to  the  reversion  out 
of  which  the  lease  was  granted,  he  cannot  by  mere  notice  compel 
the  tenant  to  pay  rent  to  him,  nor  does  his  title  to  the  rent  accrue 
until  he  has  obtained  possession  of  the  mortgaged  estate.  He  is 
not  the  landlord  of  the  mortgagor,  nor  by  virtue  of  the  relation 
between  them  entitled  to  the  rents  and  profits  of  the  mortgaged 
estate  as  long  as  the  mortgagor  retains  possession  (Eirans  v.  Elliot, 
9  Ad.  &  Ell.  159;  The  Manchester  Hospital  and  Life  Ins.  Co.  v. 
Wilson,  10  Met.  126). 

The  mortgage,  however,  conveys  the  title  to  possession  to  the 
mortgagee,  and,  indeed,  when,  as  in  this  case,  forfeited,  the  whole 


302  COMMON   LAW  RELATIONS 

title  at  law;  and,  unless  some  statute  forbid,  which  none  here  does, 
the  tenant  of  the  mortgagor  may  attorn  to  the  mortgagee,  and  by 
thus  placing  him  in  possession  of  the  mortgaged  premises  entitle 
him  to  the  rents  thereof.  There  is  no  disloyalty  to  his  landlord 
in  such  attornment  by  the  tenant,  since  thereby  he  only  recognizes 
a  title  which  his  landlord  has  granted  {Jones  v.  Clark,  20  Johns. 
51).  In  Evans  v.  Elliott,  supra.  Lord  Denman  seems  to  agree  that 
the  tenant's  attornment  will  create  a  privity  between  himself  and 
the  mortgagee,  or,  as  he  expresses  it,  "is  at  least  necessary"  to 
create  the  relation  of  tenant  and  landlord  between  them;  although 
he  decides  that  the  attornment  will  not  relate  back  to  a  notice 
before  given  by  the  mortgagee  to  the  tenant,  but  creates  the  privity 
and  right  to  rent  only  from  the  time  when  it  is  actually  made.  As 
attornment  is  nothing  more  than  the  consent  of  the  tenant  to  the 
grant  of  the  seignory,  or,  in  other  words,  to  become  tenant  of  the 
new  lord  (Co.  Lit.  309  a;  Butler's  note,  272),  and  the  tenants  in 
this  case,  by  promising  to  pay  and  actually  paying  the  rent  to  the 
mortgagee,  thus  attorned  to,  and  became  tenants  to  him,  it  follows 
that  they  rightfully  paid  to  him  the  subsequently  accruing  rent, 
and  cannot  be  compelled  to  pay  it  over  again  to  the  plaintiff. 
Judgment  must  therefore  be  rendered  for  the  defendants,  for  their 
costs.^ 

Teal  v.  Walker,  111  U.  S.  242  (1884).  Mr.  Justice  Woods 
(247).  The  decision  of  the  question  raised  by  the  demurrer  to  the 
complaint  is  not  affected  by  the  stipulation  contained  in  the  defeas- 
ance of  August  19th,  1874,  that  Goldsmith  and  Teal  should,  on 
default  made  in  the  payment  of  the  principal  of  Goldsmith's  note, 
and  on  the  demand  of  Hewett,  surrender  the  mortgaged  premises  to 
him.  If  this  was  a  vaUd  and  binding  undertaking,  it  did  not 
change  the  rights  of  the  parties.  Without  any  such  stipulation, 
Hewett,  unless  it  was  otherwise  provided  by  statute,  was  entitled, 
at  least  on  default  in  the  payment  of  the  note  of  Goldsmith,  to  the 
possession  of  the  mortgaged  premises  (Keech  v.  Hall,  1  Doug.  21; 
Rockwell  V.  Bradley,  2  Conn.  1;  Synith  v.  Johns,  3  Gray,  517; 
Jackson  v.  Dubois,  4  Johns.  216;  Furbush  v.  Goodwin,  29  N.  H. 

^Stedman  v.   Gassett,    18  Vt.   346  (1874);   Comer  v.  Sheehan,   74  Ala. 

(1846),  accord.     That  neither  entry  452  (1883).     But  compare  Drakford 

by  the  mortgagee  nor  attornment  of  v.  Turk,  75  Ala.  339  (1883),  and  see 

the  tenant  is  necessary  to  entitle  the  Bartlett  v.  Hitchcock,  10  Bradw.  (111.) 

mortgagee  to  "intercept"  the  rents,  87  (1881),  contra. 
see    Marx    v.    Marx,    51    Ala.    222 


TEAL  V.   WALKER  303 

321;  Howard  v.  Houghton,  64  Me.  445;  Den  ex  dem.  Hart  v.  Stock- 
ton, 7  Halst.  322;  Ely  v.  M'Guire,  2  Ohio,  223;  vols.  1  and  2,  2d 
Ed.  372).  The  rights  of  the  parties  are,  therefore,  the  same  as  if 
the  defeasance  contained  no  contract  for  the  delivery  of  the  pos- 
session. 

We  believe  that  the  rule  is  without  exception  that  the  mortgagee 
is  not  entitled  to  demand!  of  the  owner  of  the  equity  of  redemption 
the  rents  and  profits  of  the  mortgaged  premises  until  he  takes 
actual  possession.  In  the  case  of  Moss  v.  Gallimore,  1  Doug.  279, 
Lord  Mansfield  held  that  a  mortgagee,  after  giving  notice  of  his 
mortgage  to  a  tenant  in  possession  holding  under  a  lease  older  than 
the  mortgage,  is  entitled  to  the  rent  in  arrear  at  the  time  of  the 
notice,  as  well  as  to  that  which  accrues  afterwards.  This  ruling 
has  been  justified  on  the  ground  that  the  mortgagor,  having  con- 
veyed his  estate  to  the  mortgagee,  the  tenants  of  the  former  be- 
came the  tenants  of  the  latter,  which  enabled  him,  by  giving  notice 
to  them  of  his  mortgage,  to  place  himself  to  every  intent  in  the 
same  situation  towards  them  as  the  mortgagor  previously  occupied 
{Rawson  v.  Eicke,  7  Ad.  &  El.  451;  Burrowes  v.  Gradin,  1  Dowl. 
&  Lowndes,  213).  Where,  however,  the  lease  is  subsequent  to  the 
mortgage,  the  rule  is  well  settled  in  this  country,  that,  as  no  rever- 
sion vests  in  the  mortgagee,  and  no  privity  of  estate  or  contract  is 
created  between  him  and  the  lessee,  he  cannot  proceed,  either  by 
distress  or  action,  for  the  recovery  of  the  rent  (Mayo  v.  Shattuck, 
14  Pick.  533;  Watts  v.  Coffin,  11  Johns.  495;  McKircher  v.  Hawley, 
16  id.  289;  Sanderson  v.  Price,  1  Zabr.  637;  Price  v.  Smith,  1 
Green's  Ch.  [N.  J.]  516). 

The  case  of  Moss  v.  Gallimore  has  never  been  held  to  apply  to 
a  mortgagor  or  the  vendee  of  his  equity  of  redemption.  Lord 
Mansfield  himself,  in  the  case  of  Chinnery  v.  Blackman,  3  Doug. 
391,  held  that  until  the  mortgagee  takes  possession  the  mortgagor 
is  owner  to  all  the  world,  and  is  entitled  to  all  the  profits  made.  The 
rule  on  this  subject  is  thus  stated  in  Bacon's  Abridgment,  title 
Mortgage,  C:  "Although  the  mortgagee  may  assume  possession  by 
ejectment  at  his  pleasure,  and,  according  to  the  case  of  Moss  v. 
Gallimore,  Doug.  279,  may  give  notice  to  the  tenants  to  pay  him 
the  rent  due  at  the  time  of  the  notice,  yet,  if  he  suffers  the  mort- 
gagee to  remain  in  possession  or  in  receipt  of  the  rents,  it  is  a 
privilege  belonging  to  his  estate  that  he  cannot  be  called  upon 
to  account  for  the  rents  and  profits  to  the  mortgagee,  even  although 
the  security  be  insufficient."  So,  in  Higgins  v.  York  Buildings 
Company,  2  Atk.  107,  it  was  said  by  Lord  Hardwicke:  "In  case  of 


304  COMMON    LAW    RELATIONS 

a  mortgagee,  where  a  mortgagor  is  left  in  possession^  upon  a  bill 
brought  by  the  mortgagee  for  an  account  in  this  court,  he  never 
can  have  a  decree  for  an  account  of  rents  and  profits  from  the 
mortgagor  for  any  of  the  years  back  during  the  possession  of  the 
mortgagor,"  and  the  same  judge  said  in  the  case  of  Mead  v.  Lo7-d 
Orrery,  3  Atk.  244:  "As  to  the  mortgagor,  I  do  not  know  of  any 
instance  where  he  keeps  in  possession  that  he  is  liable  to  account 
for  the  rents  and  profits  to  the  mortgagee,  for  the  mortgagee  ought 
to  take  the  legal  remedies  to  get  into  possession."  In  Wilson,  ex 
parte,  2  Ves.  &  B.  252,  Lord  Eldon  said:  "Admitting  the  decision 
in  Moss  V.  Galliniore  to  be  sound  law,  I  have  been  often  surprised 
by  the  statement  that  a  mortgagor  was  receiving  the  rents  for  the 
mortgagee.  ...  In  the  instance  of  a  bill  filed  to  put  a  term  out 
of  the  way,  which  may  be  represented  as  in  the  nature  of  an  equi- 
table ejectment,  the  court  will,  in  some  cases,  give  an  account  of 
the  past  rents.  There  is  not  an  instance  that  a  mortgagee  has  per 
directum  called  upon  the  mortgagor  to  account  for  the  rents.  The 
consequence  is  that  the  moi'tgagor  does  not  receive  the  rents  for 
the  mortgagee."  See,  also,  Coleman  v.  Duke  of  St.  Albans,  3  Ves. 
Jr.  25;  Gresley  v.  Adderly,  1  Swanst.  573. 

The  American  cases  sustain  the  rule  that,  so  long  as  the  mort- 
gagor is  allowed  to  remain  in  possession,  he  is  entitled  to  receive 
and  apply  to  his  own  use  the  income  and  profits  of  the  mortgaged 
estate;  and,  although  the  mortgagee  may  have  the  right  to  take 
possession  upon  condition  broken,  if  he  does  not  exercise  the  right, 
he  cannot  claim  the  rents;  if  he  wishes  to  receive  the  rents,  he  must 
take  means  to  obtain  the  possession  (Wilder  v.  Houghton,  1  Pick. 
87;  Boston  Bank  v.  Reed,  8  Pick.  459;  Noyes  v.  Rich,  52  Me.  115). 
In  Hughes  v.  Edwards,  9  Wheat.  500,  it  was  held  that  a  mortgagor 
was  not  accountable  to  the  mortgagee  for  the  rents  and  profits 
received  by  him  during  his  possession,  even  after  default,  and  even 
though  the  land,  when  sold,  should  be  insufficient  to  pay  the  debt, 
and  that  the  purchaser  of  the  equity  of  redemption  was  not  account- 
able for  any  part  of  the  debt  beyond  the  amount  for  which  the  land 
was  sold.  In  the  case  of  Gilman  v.  Ulinois  &  Mississippi  Telegraph 
Company,  91  U.  S.  603,  it  was  declared  by  this  court  that  where 
a  railroad  company  executed  a  mortgage  to  trustees  on  its  property 
and  franchises,  "together  with  the  tolls,  rents,  and  profits  to  be 
had,  gained,  or  levied  thereupon,"  to  secure  the  payment  of  bonds 
issued  by  it,  the  trustees,  in  behalf  of  the  creditors,  were  not  en- 
titled to  the  tolls  and  profits  of  the  road,  even  after  condition 
broken  and  the  filing  of  a  bill  to  foreclose  the  mortgage,  they  not 


TEAL   V.    WALKER  305 

having  taken  possession  or  had  a  receiver  appointed.  The  court 
said,  in  delivering  judgment  in  this  case:  "A  mortgagor  of  real 
estate  is  not  Hable  for  rent  while  in  possession.  He  contracts  to 
pay  interest,  not  rent."  So  in  Kountze  v.  Omaha  Hotel  Company, 
107  U.  S.  378,  it  was  said  by  the  court,  speaking  of  the  rights  of  a 
mortgagee:  "But  in  the  case  of  a  mortgage,  the  land  is  in  the  nature 
of  a  pledge;  it  is  only  the  land  itself,  the  specific  thing,  which  is 
pledged.  The  rents  and  profits  are  not  pledged;  they  belong  to  the 
tenant  in  possession,  whether  the  mortgagor  or  a  third  person  claim- 
ing under  him.  .  .  .  The  plaintiff  in  this  case  was  not  entitled  to 
possession,  nor  to  the  rents  and  profits."  See  also  Hutchins  v. 
King,  1  Wall.  53,  57-58. 

Chancellor  Kent  states  the  modern  doctrine  in  the  following 
language:  "The  mortgagor  has  a  right  to  lease,  sell  and  in  e^Try 
respect  to  deal  with  the  mortgaged  premises  as  owner  so  long  as 
he  is  permitted  to  remain  in  possession,  and  so  long  as  it  is  under- 
stood and  held  that  every  person  taking  under  him,  takes  subject 
to  all  the  rights  of  the  mortgagee,  unimpaired  and  unafTected.  Nor 
is  he  liable  for  rents,  and  the  mortgagee  must  recover  the  possession 
by  regular  entry  by  suit  before  he  can  treat  the  mortgagor,  or  the 
person  holding  under  him,  as  a  trespasser"  (4  Kent  Com.  157). 
See  also  American  Bridge  Company  v.  Heidelbach,  94  U.  S.  798; 
Clarke  v.  Curtis,  1  Grattan,  289;  Ba7ik  of  Ogdejisburg  v.  Arnold, 
5  Paige  Ch.  38;  Hunter  v.  Hays,  7  Biss.  362;  Souter  v.  La  Crosse 
Railway,  Wool  worth  C.  C.  80,  85;  Foster  v.  Rhodes,  10  Bank  Reg. 
523.  The  authorities  cited  show  that,  as  the  defendant  in  error 
took  no  effectual  steps  to  gain  possession  of  the  mortgaged  prem- 
ises, he  is  not  entitled  to  the  rents  and  profits  while  they  were  oc- 
cupied by  the  owner  of  the  equity  of  redemption. 

The  case  against  the  right  of  the  defendant  in  error  to  recover 
in  this  case  the  rents  and  profits  received  by  the  owner  of  the  equity 
of  redemption  is  strengthened  by  section  323,  chapter  4,  title  1, 
General  Laws  of  Oregon,  1843-1872,  which  declares  that  "a  mort-l 
gage  of  real  propert}'^  shall  not  be  deemed  a  conveyance  so  as  to 
enable  the  owner  of  the  mortgage  to  recover  possession  of  the  real 
property  without  a  foreclosure  and  sale  according  to  law."  This 
provision  of  the  statute  cuts  up  by  the  roots  the  doctrine  of  Moss  v. 
GaUimore,  uhi  supra,  and  gives  effect  to  the  view  of  the  American 
courts  of  equity  that  a  mortgage  is  a  mere  security  for  a  debt,  and 
establishes  absolutely  the  rule  that  the  mortgagee  is  not  entitled 
to  the  rents  and  profits  until  he  gets  possession  under  a  decree  of 
foreclosure.    For  if  a  mortgage  is  not  a  conveyance,  and  the  mort- 


306  COMMON   LAW  RELATIONS 

gagee  is  not  entitled  to  possession,  his  claim  to  the  rents  is  without 
support.  This  is  recognized  by  the  Supreme  Court  of  Oregon  as 
the  effect  of  a  mortgage  in  that  State.  In  Besser  v.  Hawthorn, 
3  Oregon,  129,  at  133,  it  was  declared:  "Our  system  has  so  changed 
this  class  of  contracts  that  the  mortgagor  retains  the  right  of  pos- 
session and  the  legal  title."  See,  also,  Anderson  v.  Baxter,  4  Oregon, 
105;  Roberts  v.  Sutherlin,  id.  219. 

The  case  of  the  defendant  in  error  cannot  be  aided  by  the  stipula- 
tion in  the  defeasance  of  August  19th,  1874,  exacted  by  the  mort- 
gagee, that  Goldsmith  and  Teal  would,  upon  default  in  the  pay- 
ment of  the  note  secured  by  the  mortgage,  deliver  to  Hewett,  the 
trustee,  the  possession  of  the  mortgaged  premises.  That  contract 
was  contrary  to  the  public  policy  of  the  State  of  Oregon,  as  ex- 
pressed in  the  statute  just  cited,  and  was  not  binding  on  the  mort- 
gagor or  his  vendee,  and,  although  not  expressly  prohibited  by  law, 
yet,  like  all  contracts  opposed  to  the  public  policy  of  the  State,  it 
cannot  be  enforced  (Railroad  Company  v.  Lockwood,  17  Wall.  357; 
Bank  of  Kentucky  v.  Adams  Express  Company,  93  U.  S.  174;  Mar- 
shall V.  Baltimore  &  Ohio  Railroad  Company,  16  How.  314;  Meguire 
v.  Corwine,  101  U.  S.  108).^ 

HUBBELL  V.   MOULSON 
Court  of  Appeals  of  New  York,  1873 

(53  A^.  F.  225) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  the  fourth  judicial  department  in  favor  of  defendants, 
entered  upon  an  order  denying  motion  for  a  new  trial  and  directing 
a  judgment  on  verdict. 

This  action  was  ejectment  to  recover  possession  of  the  undivided 
1  "Since  the  right  of  a  mortgagee  issues  and  profits,  and  the  mortgagee 
before  default  is  only  that  of  a  cannot  bring  ejectment  and  is  under 
holder  of  a  security,  he  has  no  right  the  obligation  to  account  as  a  mort- 
to  enter  or  bring  ejectment  before  gagee  in  possession.  Sanderson  v. 
the  default.  The  necessary  logical  Price,  21  N.  J.  Law,  646,  note; 
result  is  that  his  right  to  possession  Shields  v.  Lozear,  34  N.  J.  Law,  496, 
is  not,  as  at  common  law,  the  right  501.  Before  the  mortgagee  can  ob- 
of  an  owner  subject  only  to  be  de-  tain  possession  he  must  enter  upon 
feated  by  the  performance  of  the  the  land.  It  is  elementary  that  an 
condition  by  the  mortgagor,  but  is  entry  requires  publicity.  2  Bl.  Com. 
only  a  right  of  re-entry  upon  failure  311,  312;  3  Bl.  Com.  174."  Per 
of  the  mortgagor  to  perform  the  Swayze,  J.,  in  Cohn  v.  Plass,  85 
condition.  Before  that  time,  the  N.  J.  Eq.  153,  160. 
mortgagor  is  entitled  to  the  rents. 


HUBBELL    V.    MOULSON  307 

half  of  a  lot  of  land  situate  in  Brighton,  Monroe  County.  The 
facts  appear  sufficiently  in  the  opinion.  The  court  directed  a 
verdict  in  favor  of  defendants,  which  was  rendered  accordingly. 

Andrews,  J.  The  plaintiffs  claim  title  under  Alfred  Hubbell, 
the  mortgagor,  to  the  undivided  half  of  premises  mortgaged  by  him 
to  Hiram  Sibley,  December  1,  1846,  to  secure  the  payment  of 
$7,000.  The  action  is  ejectment,  and  it  was  necessary  for  the  plain- 
tiffs, in  order  to  recover  under  their  complaint,  to  show  that  they 
were  entitled,  as  against  the  defendants,  to  the  possession  of  the 
premises  at  the  time  of  the  commencement  of  the  action.  The  de- 
fendants are  the  grantees  of  Sibley,  the  mortgagee,  under  a  deed 
dated  June  7, 1849,  and  are  in  possession,  claiming  under  that  deed. 
They  stand,  by  reason  of  that  conveyance,  in  privity  with  the  mort- 
gagee, and  their  right  to  the  possession  is  the  right  of  the  mort- 
gagee, and  the  right  of  the  plaintiffs  depends  upon  the  same  prin- 
ciples as  if  Sibley  was  in  possession  and  the  action  had  been  brought 
against  him  (Jackson  v.  Mueller,  10  J.  R.  479;  Jackson  v.  Bowen, 
7  Cow.  13;  Robinson  v.  Ryan,  25  N.  Y.  320).  The  plaintiffs  on  the 
trial  offered  to  prove  that  the  mortgage  debt  had  been  paid  by  the 
receipt  by  Sibley,  before  the  commencement  of  the  action,  of  rents 
and  profits  from  the  land  suflficient  to  satisfy  it.  The  evidence  was 
excluded.  If  the  mortgage  was  in  law  subsisting  and  unsatisfied 
when  the  action  was  commenced,  then  it  cannot  be  maintained,  as 
the  authorities  are  decisive  that  ejectment  will  not  lie  by  a  mort- 
gagor against  a  mortgagee  in  possession  (Van  Duyne  v.  Thayre, 
14  Wend.  233;  Phyfev.  Riley,  15  Wend.  248;  Pell  v.  Ulmar,  18  N.  Y. 
139).  Leaving  out  of  view  the  alleged  title  under  the  statute  fore- 
closure, the  question  arises,  whether  the  receipt  by  a  mortgagee 
in  possession  of  rents  and  profits  surficient  to  satisfy  the  mortgage 
^-^trebt,  does  ipso  jacio  extinguish  it  and""Hischarge  the  lien  of  the 
"  mortgage.  If  it  Hoes  not,  then  the  evidence  was  properly  excluded. 
If  admitted,  it  would  not  have  shown  a  right  in  the  plaintiffs  to 
the  possession  of  the  premises  when  the  action  was  brought. 

It  is  the  settled  doctrine  in  this  State  that  a  mortgagee  has  by  ' 
virtue  of  his  mortgage  a  lien  only,  and  not  an  estate  in  the  land 
mortgaged  (Runyan  v.  Mersereau,  11  J.  R.  537;  Jackson  v.  Craft, 
18  id.  110;  Jackson  v.  Bronson,  19  id.  325;  Kortright  v.  Cady, 
21  N.  Y.  343;  Stoddard  v.  Hart^  23  id.  560).  In  harmony  with 
this  view  it  was  held  in  Kortright  v.  Cady  that  a  tender  of  the 
mortgage  debt  after  it  became  due  discharged  the  lien  of  the  mort- 
gage and  prevented  a  subsequent  foreclosure.    And  it  was  held  in 


308  COMMON    LAW   RELATIONS 

Edwards  v.  The  Fireman's  Fire  Ins.  and  Loan  Co.,  21  Wend.  467, 
26  id.  541,  that  upon  a  tender  after  default  by  a  mortgagor  of  the 
mortgage  debt,  ejectment  would  he  in  his  favor  upon  the  refusal 
of  the  mortgagee  to  sm-render  the  possession.  But  while  no  title 
in  a  strict  sense  vests  in  the  mortgagee  of  land  until  foreclosure, 
yet  his  interest  is,  in  some  cases,  treated  and  regarded  as  a  title, 
for  the  purpose  of  protecting  and  enforcing  the  equities  between 
parties.  An  instance  of  this  is  found  in  Mickles  v.  Townsend, 
18  N.  Y.  575,  where  it  was  so  held  for  the  purpose  of  applying  the 
doctrine  of  estoppel  by  deed  against  a  person  claiming  as  assignee 
of  a  mortgage  which  existed  at  the  time  of  his  prior  convej^ance 
of  the  mortgaged  premises  with  warranty,  but  which  was  assigned 
to  him  afterward.  And  in  Van  Dyne  v.  Thayre,  19  Wend.  162, 
the  release  of  the  equity  of  redemption  by  the  mortgagor  to  the 
mortgagee  was  held  to  inure  as  an  enlargement  of  the  estate  of  the 
mortgagee  so  as  to  prevent  the  plaintiff's  recovering  dower  at  law, 
in  disregard  of  the  equity  of  the  defendant  to  have  the  mortgage 
first  satisfied  out  of  the  land  (Cowen,  J.,  21  Wend.  485). 

It  is  easy  to  see  that  where  the  Enghsh  doctrine  prevails,  that 
the  mortgage  conveys  a  legal  title  to  the  mortgaged  premises,  the 
right  of  the  mortgagor  to  an  account  of  the  rents  and  profits  of  the 
land  received  by  the  mortgagee  is  purely  and  exclusively  of  equi- 
table cognizance.  At  law,  the  mortgagee  is  the  owner  of  the  estate, 
and  takes  the  rents  and  profits  in  that  character.  In  equity,  the 
mortgagor  is  regarded  as  the  owner  until  foreclosure,  and  his  right 
to  an  account  is  incident  to  his  right  of  redemption  (2  Wash,  on 
Real  Property,  161,  205;  Seaver  v.  Durant,  39  Vt.  103;  Parson  v. 
Welles,  17  Mass.  419).  But  the  necessity  to  resort  to  an  accounting 
in  equity,  in  order  to  have  the  rents  and  profits  apphed  to  the 
satisfaction  of  the  mortgage,  is  not  obviated  by  the  fact  that  here 
the  mortgagor  retains  the  legal  title.  The  mortgagee  in  possession 
takes  the  rents  and  profits  in  the  quasi  character  of  trustee  or  bailiff 
of  the  mortgagor  (2  Pow.  on  Mort.,  946  a;  2  Wash.  205).  They 
are  applied  in  equity  as  an  equitable  set-off  to  the  amount  due  on 
the  mortgage  debt  (Ruckman  v.  Astor,  9  Paige,  517.)  The  law 
does  not  apply  them. as  received  to  the  payment  of  the  mort- 
gage. It  depends  upon  the  result  of  an  accounting  upon  equitable 
principles,  whether  any  part  of  the  rents  and  profits  received  shall 
be  so  appHed.  The  mortgagee  is  entitled  to  have  them  appUed,  in 
the  first  instance,  to  reimburse  him  for  taxes  and  necessary  repairs 
made  upon  the  premises;  for  sums  paid  by  him  upon  prior  incum- 
brances upon  the  estate,  in  order  to  protect  the  title,  and  for  costs 


HERRMANN   V.    CABINET   LAND    CO.  309 

in  defending  it;  and  if  he  has  made  permanent  improvements  upon 
the  land  in  the  behef  that  he  was  the  absolute  owner,  the  increased 
value  by  reason  thereof  may  be  allowed  him.  So  he  may  be  charged 
with  rents  and  profits  he  might  have  received,  if  his  failure  to  re- 
cover them  is  attributable  to  his  fraud  or  willful  default  (2  Powell 
on  Mort.  957,  note;  4  Kent,  185;  2  Wash.  218;  Cameron  v.  Irwin, 
5  Hill,  272;  Mickles  v.  Dillaye,  17  N.  Y.  80).  In  many  cases  com- 
plicated equities  must  be  determined  and  adjusted  before  it  can 
be  ascertained  what  part,  if  any,  of  the  rents  and  profits  received 
is  to  be  applied  upon  the  mortgage  debt.  In  the  absence  of  an 
agreement  between  the  parties  there  is  no  legal  satisfaction  of  the 
mortgage  by  the  receipt  of  rents  and  profits  by  a  mortgagee  in 
possession  to  an  amount  sufficient  to  satisfy  it,  and  his  character 
as  mortgagee  in  possession  is  not  divested  until  they  are  applied 
by  the  judgment  of  the  court  in  satisfaction  of  the  mortgage. 
These  considerations  lead  to  an  affirmance  of  the  judgment  without 
considering  the  question  of  the  validity  of  the  statute  foreclosure. 

The  plaintiffs  claim  to  recover  upon  the  allegation  of  a  right  to 
the  possession  of  the  premises  when  the  action  was  commenced. 
The  defendants  were  in  possession,  claiming  under  the  mortgagee 
whose  mortgage  was  outstanding  and  unsatisfied.  The  action  is 
not  for  a  redemption  or  for  an  accounting,  and  the  plaintiffs  are 
not  in  the  attitude  of  resisting  an  attempt  by  the  mortgagee  to 
enforce  the  mortgage. 

The  judgment  should  be  affirmed,  with  costs. 

All  concur.  Judgment  affirmed} 

HERRMANN  v.   CABINET  LAND  CO. 

Court  of  Appeals  of  New  York,  1916 

(217  N.  Y.  526) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  second  judicial  department,  entered  March  19, 
1914,  affirming  a  judgment  in  favor  of  defendant  entered  upon  an 

iSee,    also,    Phyfe    v.    Riley,    15  Harper  v.  Ely,   70   111.   581    (1873); 

Wend.    248    (1836);    Madison    Ave.  Johnson  v.  Sandhoff,  .30  Minn.   197 

Church  V.  Oliver  St.  Church,  73  N.  Y.  (1883).     But  where   the  mortgagee 

82    (1878);   Toumshend  v.    Thomson,  clahns  under  an  equitable  mortgage, 

139    N.    Y.    152    (1893);    Becker   v.  see  Jackson  v.  Parkhurst,  4  Wend. 

McCrea,    193    N.    Y.    423    (1908);  369   (1830)   and  Chase  v.   Peck,  21 

Gillett  V.  Eaton,  6  Wis.  30   (1857);  N.     Y.     581,     586     (1860),     supra, 

Hennesy  v.  Farrell,  20  Wis.  42  (1865) ;  p.  99. 


310  COMMON    LAW   RELATIONS 

order  of  Special  Term  granting  a  motion  by  defendant  for  judg- 
ment in  its  favor  upon  the  pleadings. 

This  is  an  action  of  ejectment.  Both  parties  claim  under  one 
William  Bragaw,  who  owned  the  lands  in  question  in  the  year  1870. 
The  plaintiffs  claim  as  grantees  under  Bragaw  by  virtue  of  several 
mesne  conveyances.  One  Charles  H.  Schorr  was  the  owner  in  the 
plaintiffs'  chain  of  title  in  the  year  1874. 

The  defendants  claim  under  a  purchase-money  mortgage  which 
Bragaw  took  from  his  immediate  grantee.  In  1894  the  executors 
of  Bragaw  began  an  action  to  foreclose  the  mortgage.  Charles  H. 
Schorr,  aforesaid,  was  named  as  a  party  to  the  action,  and  an  affi- 
davit showing  service  on  him  of  the  summons  and  complaint  ap- 
pears in  the  foreclosure  proceedings.  The  fact  is  that  Schorr  died 
about  the  year  1890,  and  the  affidavit  of  service  on  him  is,  of  com'se, 
erroneous.  The  land  was  sold  under  the  judgment  in  the  foreclos- 
ure action  and  the  defendant  takes  title  under  the  purchaser  at  the 
foreclosure  sale. 

The  plaintiffs  are  heirs  of  Schorr  and  they  bring  this  action  to 
recover  possession  of  the  mortgaged  property.  The  defendant  in 
the  second  defense  in  the  answer  sets  up  the  mortgage  to  Bragaw 
and  the  foreclosure  thereof  and  the  sale  thereunder.  The  answer 
also  contains  an  allegation  as  part  of  the  second  defense  that  the 
defendant  entered  peacefully  into  the  possession  of  the  land  in 
reliance  upon  the  fact  that  the  foreclosure  proceedings  showed 
service  of  the  summons  and  complaint  on  Schorr,  and  a  further 
allegation  that  the  plaintiffs  have  not  offered  to  pay  the  amount 
due  on  the  mortgage  or  any  part  thereof.  The  defendant  claims 
to  hold  the  property  sought  to  be  recovered  as  mortgagee  in  posses- 
sion. 

To  this  second  defense  the  plaintiffs  demurred  on  the  ground  that 
it  was  insufficient  in  law  upon  the  face  thereof.  The  defendant 
was  successful  at  the  Special  Term  and  the  judgment  in  its  favor 
was  affirmed  by  the  Appellate  Division. 

CuDDEBACK,  J.  In  Order  to  acquire  the  rights  of  a  mortgagee 
in  possession  it  was  necessary  for  the  defendant  to  show  that  it 
had  entered  with  the  mortgagor's  consent,  or  had  otherwise  entered 
lawfully.  It  was  not  sufficient  to  show  an  entry  under  circumstan- 
ces that  would  constitute  a  trespass.  (Barson  v.  Mulligan,  191' 
N.  Y.  306,  321.)  ^     These  propositions  are  not  disputed  by  the  de- 

1  In  this  case,  the  Court  of  Appeals  means  of  getting  possession  that  a 
said  (1908):  "The  mortgagee  has  no       stranger  has  not." 


HERRMANN   V.    CABINET   LAND    CO.  311 

fendant's  counsel,  but  he  claims  that  the  defendant's  possession 
is  in  accord  therewith,  and  he  relies  upon  the  defective  foreclosure 
proceedings  to  sustain  his  position.  He  attributes  in  some  way 
or  other  to  those  proceedings  the  force  of  a  consent  on  the  part  of 
the  defendants  in  that  action,  even  if  they  were  not  served  and 
did  not  appear,  to  the  possession  of  the  defendant  in  this  action 
which  makes  its  entry  lawful. 

But  a  judgment  of  foreclosure  in  which  the  owners  of  the  equity 
of  redemption  have  not  been  served  with  process  or  do  not  volun- 
tarily appear,  is  absolutely  without  jurisdiction  and  as  against 
such  owners  the  purchaser  at  the  sale  under  the  judgment  derives 
no  title  whatsoever.  {Watson  v.  Spence,  20  Wend.  260;  Shriver  v. 
Shriver,  86  N.  Y.  575;  Wing  v.  Field,  35  Hun,  617;  Thomas  on 
Mortgages  [3d  ed.],  §  256.) 

Schorr,  the  owner  of  the  equity  of  redemption,  was  dead  when 
the  foreclosure  proceedings  were  instituted,  and  his  heirs  at  law,  the 
plaintiffs,  so  far  as  it  appears,  never  heard  of  the  suit  or  the  sale 
and  conveyance  of  the  mortgaged  property,  and  their  present  at- 
titude is  wholly  opposed  to  the  idea  that  they  ever  expressly  or 
impliedly  consented  to  the  defendant's  possession. 

It  seems  to  me  that  the  case  of  Howell  v.  Leavitt  (95  N.  Y.  617), 
controls  the  decision  here.  In  that  case  the  owners  of  the  equity  of 
redemption  were  not  made  parties  to  a  suit  in  foreclosure  and  the 
judgment  against  them  was  enforced  by  a  writ  of  assistance  which 
put  the  mortgagee  in  possession.  The  court  held  that  the  posses- 
sion of  the  mortgagee  was  without  lawful  authority  and  amounted 
to  a  trespass.  Deutsch  v.  Hoab  (135  App.  Div.  756)  is  to  the  same 
effect. 

The  plaintiffs  seek  to  distinguish  the  case  of  Howell  v.  Leavitt 
(supra)  from  the  case  under  consideration  by  the  fact  that  in  the 
former  the  owners  of  the  equity  of  redemption  were  excluded  from 
possession  and  the  mortgagee  was  installed  by  means  of  a  writ 
of  assistance,  but  that  is  not  a  substantial  difference.  The  judg- 
ment of  foreclosure  and  the  sale  thereunder  is  binding  upon  the 
defendants  in  the  action  and  they  are  bound  to  comply  therewith 
whether  or  not  a  writ  of  assistance  is  issued.  It  cannot  be  said  that 
by  yielding  up  possession  of  the  premises  sold  under  the  judgment, 
without  awaiting  the  issuance  of  the  writ,  the  defendants  waive 
any  of  their  rights. 

It  may  be  that  if  some  lienor  claiming  subsequent  to  the  mort- 
gage were  here  complaining  of  the  defective  foreclosure,  or  alleg- 
ing that  he  had  not  been  served  with  process,  the  court  would  re- 


312  COMMON   LAW   RELATIONS 

quire  him  to  redeem  and  would  regard  the  purchaser  in  possession 
under  the  foreclosure  sale  as  a  mortgagee  in  possession.  But  in  a 
case  like  this  where  the  owners  of  the  equity  of  redemption  have 
not  been  served  and  they  are  complaining,  it  would  be  unjust  to 
say  that  their  only  remedy  against  the  purchaser  is  an  action  for 
an  accounting  and  for  permission  to  redeem  the  premises  from  the 
mortgage.  If  that  were  the  law,  the  mortgagee  in  most  cases 
would  only  have  to  await  a  time  when  the  mortgaged  premises 
were  temporarily  unoccupied  and  enter  peacefully  thereon,  and  the 
mortgagor  would  then  be  limited  to  an  action  to  redeem  with  all 
the  burden  of  attack  and  of  proof  resting  upon  him. 

No  case  cited  by  the  defendant  from  the  courts  of  this  state  goes 
to  the  extent  of  so  holding.^ 

In  the  case  of  Howell  v.  Leavitt  (supra)  it  is  said  of  these  decisions 
and  others  of  a  like  character:  ''In  most  of  the  cases  which  have 
upheld  the  right  of  the  mortgagee,  his  possession  was  obtained  with 
the  consent,  express  or  implied,  of  the  owner  of  the  land,  although 
in  some  of  them  the  mode  of  acquhing  possession  did  not  distinctly 
appear,  and  in  many  the  rule  is  stated  quite  broadly  and  with  little 
of  restriction  or  limitation  "  (p.  621).  The  cases  cited  by  the  de- 
fendant fall  short  of  sustaining  its  claim. 

Within  the  principle  of  Howell  v.  Leavitt  (supra)  the  entry  of  the 
defendant  upon  the  mortgaged  premises  was  a  trespass  and  noth- 
ing more,  and  the  defendant  did  not  thereby  acquire  the  rights  of  a 
mortgagee  in  possession.  The  second  defense  is,  therefore,  in- 
sufficient. 

I  recommend  that  the  judgment  appealed  from  be  reversed,  with 
costs  in  all  courts,  and  defendant's  motion  for  judgment  on  the 
pleadings  be  denied. 

WiLLARD  Bartlett,  Ch.  J.,  Chase,  Collin,  Cardozo,  Sea- 
bury  and  Pound,  JJ.,  concur. 

Judgment  reversed,  etc} 

iThe  discussion  by  the  court  of  '^Accord,    Neivton    v.    McKay,    30 

the  following  cases  is  omitted:  Pell  v.  Mich.  .380  (1874).     But  see  Walters 

Ulmar,  18  N.  Y.  139,  142;  Winslow  v.    Chance,    73    Kans.    680    (1906). 

V.  Clarke,  47   N.   Y.  261;  Miser  v.  Such    early    New    York     cases    as 

Beekman,  50  N.  Y.  3.37;  Huhhell  v.  Phyfe  v.  Riley,  1.5  Wend.  248  (1836) 

Sibley,  .50  N.  Y.  468;  Townshend  v.  must    now    be    regarded    as    over- 

Thomson,  139  N.  Y.  152.  ruled. 


CHAPTER   I.    (Continuedy    ^^    J^ 
Section  III. — Dower  and  Cuiitesy'^^^ 

NASH  V.   PRESTON 
Court  of  King's  Bench,  1631 

(3  Cro.  Car.  190) 

A  BILL  in  chancery  was  referred  to  Jones,  Justice,  and  myself 
[Croke,  J.]  to  consider  whether  one  should  be  relieved  against 
dower  demanded,  &c. 

The  case  appeared  to  be  that  J.  S.,  being  seised  in  fee,  by  inden- 
ture inrolled,  bargains  and  sells  to  the  husband  for  one  hundred 
and  twenty  pounds,  in  consideration  that  he  shall  re-demise  it  to 
him  and  his  wife  for  their  lives,  rendering  a  peppercorn;  and  with 
a  condition  that  if  he  paid  the  hundred  and  twenty  pounds  at  the 
end  of  twenty  years  the  bargain  and  sale  shall  be  void.  He  re- 
demised it  accordingly,  and  dies;  his  wife  brings  dower. 

The  question  was,  whether  the  plaintiff  shall  be  relieved  against 
this  title  of  dower? 

We  conceived  it  to  be  against  equity  and  the  agreement  of  the 
husband  at  the  time  of  the  purchase,  that  she  should  have  it  against 
the  lessees;  for  it  was  intended  that  they  should  have  it  re-demised 
immediately  to  them  as  soon  as  they  parted  with  it;  and  it  is  but 
in  nature  of  a  mortgage;  and  upon  a  mortgage,  if  land  be  redeemed, 
the  wife  of  the  mortgagee  shall  not  have  dower.  And  if  a  husband 
take  a  fine  sur  cognisance  de  droit  come  ceo,  and  render  arrear. 
although  it  was  once  the  husband's,  yet  his  wife  shall  not  have 
dower,  for  it  is  in  him  and  out  of  him  quasi  uno  flatu,  and  by  onc^ 
and  the  same  act.  Yet  in  this  case  we  conceived  that  by  the  law 
she  is  to  have  dower;  for  by  the  bargain  and  sale  the  land  is  vested 
in  the  husband,  and  thereby  his  wife  entitled  to  have  dower;  and 
when  he  re-demises  it  upon  the  former  agreement,  j^et  the  lessees 
are  to  receive  it  subject  to  this  title  of  dower;  and  it  was  his  folly 
that  he  did  not  conjoin  another  with  the  bargainee,  as  is  the  ancient 
course  in  mortgages.  And  when  she  is  dowable  by  act  or  rule  in 
law,  a  court  of  equity  shall  not  bar  her  to  claim,  her  dower,  for  it  is 

313 


314  COMMON   LAW   RELATIONS 

against  the  rule  of  law,  viz.,  "Where  no  fraud  or  covin  is,  a  court 
of  equity  will  not  relieve."  And  upon  conference  with  the  other 
justices  at  Serjeants-Inn  upon  this  question,  who  were  of  the  same 
judgment,  we  certified  our  opinion  to  the  court  of  chancery  that 
the  wife  of  the  bargainee  was  to  have  dower,  and  that  a  court  of 
equity  ought  not  to  preclude  her  thereof. 


Noel  v.  Jevon,  2  Freem.  Ch.  43  (1678).  In  Curia  Cancellarice. 
The  bill  was  to  be  relieved  against  the  defendant's  dower,  her 
husband  being  only  a  trustee;  and  it  appearing  that  the  husband 
was  but  a  trustee,  the  defendant  was  barred  of  her  dower,  contrary 
to  the  opinion  of  Nash  v.  Preston,  1  Cro.  Car.  191,  and  so  it  was 
said  is  the  constant  practice  of  the  court  now.^ 


CASHBORN  V.   INGLISH 

Court  of  Chancery,  1738 

(7  Vin.  Ahr.  156) 

The  resolution  of  the  court  by  Lord  Chancellor  [Hardwicke]. 
The  principal  question  in  this  case,  on  which  I  am  now  to  give  my 
opinion,  is  whether  the  defendant  Inghsh  can  be  tenant  by  the 
curtesy  of  an  equity  of  redemption.  .  The  mortgagee  came  into 
possession  in  1731. 

Thomas  Cashborn,  father  of  the  plaintiff  and  of  the  wife  of  the 
defendant  Inglish,  by  vii-tue  of  a  marriage  settlement  being  seized 
of  some  lands  in  tail  and  of  other  lands  in  fee  simple,  had  issue 
three  daughters.  Part  of  the  land  of  which  he  was  seized  in  fee 
he  settled  on  himself  for  hfe,  with  remainder  to  Anne,  his  eldest 
daughter  in  fee,  and  the  other  part  of  such  lands  he  devised  by  his 
will  to  the  said  Anne,  his  daughter,  and  her  heirs,  subject  to  the 
pajTTient  unto  her  two  sisters  of  £200  apiece.  Anne,  after  the 
death  of  her  father,  borrowed  £900  of  the  defendant  Scarf,  and 
by  lease  and  release  of  24th  and  25th  of  June,  1728,  mortgages 
part  of  the  fee  simple  lands  to  the  said  Scarf  and  his  heirs,  under 

^"If    the    husband    was     seised  Hinton,  2  Ves.  Sen.  634.     "Because 

merely   as   trustee,    the  wife  would  the    estate,    in    equity,    would    not 

be  entitled  to  dower  at  common  law;  belong   to   the   trustee  but   to   the 

but  this  court  would  not  suffer  her  cestui  que  trust." — Finch  v.  Earl  of 

to  take  advantage  of  it." — Hinton  v.  Winchelsea,  1  P.  Wms.  278.^Rep. 


CASHBORN   V.    INGLISH  315 

a  proviso  to  be  void  on  payment  of  £900  and  interest.  August  6th, 
1729,  the  said  Anne  intermarried  with  the  defendant  IngHsh,  and 
in  1731  died,  leaving  issue  by  him  a  son,  who  died  without  issue, 
and  on  his  death  his  two  aunts,  the  plaintiffs,  became  his  heirs  at 
law  and  entitled  to  that  inheritance,  and,  as  such,  brought  then- 
bill,  Trin.,  1733,  in  this  court,  against  mortgagee  defendant  Scarf 
and  the  defendant  Inglish,  among  other  things  for  a  redemption 
of  the  mortgaged  premises,  and  to  have  an  account  of  the  rents  and 
profits  of  the  real  estate  which  belonged  to  the  plaintiff's  wife,  that 
descended  to  his  son,  from  the  time  of  the  death  of  such  son,  as 
heir  at  law  to  both  of  them. 

The  defendant  Inglish  insisted  to  be  entitled  to  the  mortgaged 
premises  for  his  life,  as  tenant  by  the  curtesy,  and  the  cause,  being 
at  issue,  was  heard  on  the  8th  of  May,  1735,  before  his  Honour,  the 
Master  of  the  Rolls,  when  it  was  decreed  that  the  defendant  In- 
glish was  not  entitled  to  be  tenant  by  the  curtesy  of  the  mortgaged 
estates,  and  so  was  decreed  to  account  for  the  rents  and  profits 
thereof  from  the  death  of  his  son. 

From  this  decree  the  defendant  Inglish  thought  fit  to  appeal,  and 
the  general  question  now  is  whether  the  husband  can  be  tenant  by 
the  curtesy  of  the  equity  of  redemption  upon  a  mortgage  in  fee? 
This  question  depends  on  two  considerations : 

First.  What  kind  of  interest  an  equity  of  redemption  is  consid- 
ered to  be  in  the  eye  of  this  court? 

Second.  What  is  requisite  to  entitle  the  husband  to  be  tenant 
by  the  curtesy? 

First.  What  kind  of  interest  in  the  eye  of  this  court  an  equity  of 
redemption  is?  An  equity  of  redemption  has  always  been  consid- 
ered in  this  court  as  an  estate  in  the  lands;  it  is  such  an  interest  in 
the  land  as  will  descend  from  ancestor  to  heir,  and  may  be  granted, 
entailed,  devised  or  mortgaged,  and  that  equitable  interest  may  be 
barred  by  a  common  recovery;  which  proves  that  an  equity  of 
redemption  is  not  considered  barely  as  a  mere  right,  but  such  an 
estate  whereof,  in  the  consideration  of  this  court,  there  may  be 
a  seisin,  or  a  devise  of  it  could  not  be  good.  The  person  who  is 
entitled  to  the  equity  of  redemption  is  in  this  court  considered 
as  owner  of  the  land,  and  the  mortgagee  to  retain  the  land  as  a 
pledge  or  deposit.  And  for  this  reason  it  is  that  a  mortgage  in  fee 
is  considered  as  a  personal  estate,  notwithstanding  the  legal  estate 
vests  in  the  heir  in  point  of  law.  The  husband  of  a  mortgagee  in 
fee  shall  never  be  tenant  by  the  curtesy  of  the  mortgaged  estate 
unless  there  be  a  foreclosure,  or  that  such  mortgage  has  subsisted 


316  COMMON    LAW   RELATIONS 

for  SO  great  a  length  of  time  as  the  court  thinks  sufficient  to  induce 
them  not  to  grant  a  redemption.  .  .  . 

It  is  objected  by  the  plaintiffs  that  an  equity  of  redemption  i;- 
only  a  right  of  action,  and  not  to  be  considered  as  such  an  estate 
whereof  there  can  be  a  tenancy  by  the  curtesy,  but  this  is  by  no 
means  well  founded;  for  this  is  no  otherwise  a  right  of  action 
than  every  trust,  and  as  there  can  be  no  benefit  had  of  an  equity 
of  redemption  but  by  suing  a  subpoena  out  of  the  court,  so  is  the 
case  of  every  mere  trust  in  land,  which  is  considered  as  a  real 
estate  in  this  court,  but  cannot  be  come  at  without  a  subpoena.  To 
say  that  is  a  mere  right  of  action  is  by  consequence  to  say  that  the 
estate  in  the  lands  is  in  nobody,  and  this  determines  the  question; 
for  if  a  mortgage  is  but  a  chose  in  action,  this  affirms  that  the 
equity  of  redemption  is  the  real  ownership  of  the  estate,  and  this 
will  determine  the  point  between  them. 

It  is  objected  that  the  mortgagee  is  not  barely  a  trustee  for  the 
mortgagor;  it  is  true,  not  barely  a  trustee,  but  it  is  sufficient  for 
the  present  purpose  if  he  is  in  part  a  trustee  for  the  mortgagor, 
and  it  is  most  certain  that  as  to  the  real  estate  in  the  land  the 
mortgagee  is  only  a  trustee  for  the  mortgagor  till  foreclosure. 
Mortgagee  is  only  owner  as  a  charge  or  incumbrance,  and  intitled 
to  hold  as  a  pledge,  and  as  to  the  inheritance  descended  and  real 
estate  in  the  land,  the  mortgagee  is  a  trustee  for  the  mortgagor 
till  the  equity  of  redemption  is  foreclosed. 

Secondly.  The  next,  consideration  is  what  is  requisite  to  intitle 
the  husband  to  be  tenant  by  the  curtesy.  At  law  four  things  are 
necessary  to  make  a  tenancy  by  the  curtesy,  to  wit,  marriage, 
having  issue  that  may  inherit,  death  of  the  wife,  and  seisin  of  the 
wife  (Co.  Litt.  30  a).  Here  it  is  admitted  that  the  three  first  did 
concur,  but  the  objection  that  is  relied  on  is  that  there  was  no 
actual  seisin  of  the  wife  during  the  coverture,  which  is  contended 
to  be  as  necessary  in  respect  to  an  equitable  estate  as  of  a  legal 
estate,  and  it  is  admitted  that  the  wife  had  no  actual  seisin  of  the 
legal  estate,  either  in  fact  or  in  law.  Here  is  no  dispute  whether 
actual  seisin  in  consideration  of  law,  but  all  that  is  beside  the 
present  question;  for  the  proceedings  are  upon  a  supposition,  as 
no  such  thing  as  a  tenant  by  the  curtesy;  but  the  true  question  is 
upon  this  point,  whether  there  was  not  such  a  seisin  or  possession 
in  the  wife  of  the  equitable  estate  in  the  land,  as  in  consideration 
of  equity  is  equivalent  to  an  actual  seisin  of  a  legal  estate  at  com- 
mon law. 

In  consideration  of  this  court,  I  am  of  opinion  there  was  such 


CASHBORN    V.    INGLISH  317 

a  seisin  of  the  wife  in  the  present  case  of  the  equity  of  redemption. 

I  have  shown  that  a  person  intitled  to  the  equity  of  redemption 
is  owner  of  the  land  of  the  legal  estate;  and,  if  so,  there  must  be 
a  seisin  of  the  legal  estate;  and  what  other  seisin  could  there  be 
than  what  Inglish  and  his  wife  had  in  the  present  case?  For  here 
is  a  mortgage  in  1728  by  Anne  Cashborn,  who  in  1729  married 
with  the  defendant  Inglish,  and  in  1731  died,  leaving  issue  a  son, 
and  the  wife  was  all  along  in  possession  till  her  death,  and  mort- 
gagee did  not  come  into  possession  till  after  her  death,  and  there  is 
not  any  foreclosure,  and  though  the  possession  of  the  wife  was  but 
as  tenant  at  will  to  the  mortgagee,  yet  it  was,  in  equity,  a  possession 
of  the  real  owner  of  the  land,  subject  only  to  a  pecuniary  charge 
on  it,  and  from  thence  I  think  it  clearly  follows  that  there  cannot 
be  a  higher  seisin  of  an  equitable  estate. 

Next,  whether  there  can  be  tenant  bj'  the  curtesy?  I  am  of 
opinion  there  may  be  a  tenant  by  the  curtesy  of  the  equitable  estate 
of  the  wife;  equity  follows  the  law  because  made  a  rule  of  property. 

And  as  to  the  next  objection  of  the  wife's  not  being  endowed  of 
an  equity  of  redemption  on  a  mortgage  in  fee,  and  that  therefore 
a  husband  ought  not  to  be  tenant  by  the  curtesy  of  an  equity  of 
redemption,  this  proves  too  much;  for  it  has  been  determined  that 
a  wife  shall  not  be  endowed  of  a  trust  estate,  yet  that  husband  shall 
be  tenant  by  the  curtesy  of  a  trust  estate.  The  argument  from 
dower  to  the  case  of  a  tenant  by  the  curtesy  fails  in  this  case. 
Perhaps  it  may  be  hard  to  find  out  a  sufficient  reason  how  it  came 
to  be  so  determined  in  the  one  case  and  not  in  the  other,  but  it  is 
safe  to  follow  former  precedents  and  what  are  settled  and  estab- 
hshed,  and  if  such  precedents  should  be  departed  from,  I  hold  it 
fit  rather  that  the  wife  should  be  allowed  her  dower  of  a  trust  estate, 
and  not  that  a  tenanc}^  by  curtesy  of  a  trust  estate  should  be  taken 
away.  It  may  be  refusing  to  allow  the  wife  dower  of  a  trust  estate 
was  because  she  could  not  have  it  at  law,  and  that  it  was  founded 
on  the  maxim  of  equitas  sequitur  legem;  ^  but  whatever  the  reason 
of  such  refusal  was,  the  husband  is  allowed  to  have  a  tenancy  by 
the  curtesy  of  a  trust  estate,  nay,  even  of  money  directed  to  be  laid 
out  in  land,  though  not  actually  laid  out,  as  in  the  case  of  Sweet- 
apple  before  cited.  .  .  . 

For  these  reasons,  upon  the  best  consideration  (although  I  form 
my  judgment  with  great  deference,  when  I  differ  in  opinion  fiom 
other  great  persons  that  have  gone  before  me),  I  am  of  opinion  that 

'The  rule  was  changed  in  Eng-  by  St.  3  &  4  Wm.  IV,  c.  105 
land   and   dower  thereafter  allowed       (1833). 


318  COMMON   LAW   RELATIONS 

the  defendant  Inglish  is  intitled  to  be  tenant  by  the  curtesy  of  the 
mortgaged  premises  in  question,  and  the  consequence  of  that  is 
that  that  part  of  the  decree  of  his  Honour,  the  Master  of  the  Rolls, 
whereby  it  is  adjudged  that  the  said  defendant  is  not  tenant  by  the 
curtesy,  must  be  reversed  (MS.  Rep.  Hill.  Vac.  11,  Geo.  2). 


Titus  v.  Nielson,  5  Johns.  Ch.  452  (1821).  The  petition  of 
Catherine  Nielson  was  presented,  claiming  dower  out  of  the  pro- 
ceeds of  the  sale  of  an  equity  of  redemption  in  certain  mortgaged 
premises.    The  opinion  was,  in  part,  as  follows: 

The  Chancellor  [Kent].  The  claim  of  the  widow  must  be 
admitted,  according  to  a  series  of  decisions  in  the  courts  of  this 
State.  In  England  dower  is  considered  as  a  mere  legal  right  and 
equity  follows  the  law  and  will  not  create  the  right  where  it  does 
not  subsist  at  law.^  It  is  on  this  principle,  according  to  Lord 
Redesdale  (2  Sch.  and  Lef.  388),  that  a  court  of  equity  will  not 
allow  dower  of  an  equity  of  redemption  reserved  upon  a  mortgage 
in  fee,  though  there  may  be  dower  of  an  equity  of  redemption  upon 
a  mortgage  for  a  term  of  years,  because  in  that  case  the  law  gives 
dower  subject  to  the  term.  The  justice,  however,  of  allowing 
dower  of  an  equitable  estate  seems  to  have  been  very  generally  felt 
and  acknowledged  in  the  English  courts  of  equity.  But  we  have 
nothing  to  do  at  present  with  the  Enghsh  adjudications  on  the 
subject,  for,  as  our  courts  of  law  do  now  allow  dower  in  certain 
cases  of  an  equity  of  redemption,  this  court,  according  to  the  doc- 
trine referred  to,  ought  to  follow  the  law,  and  also  allow  dower  out 
of  the  proceeds  of  the  equity  of  redemption,  and  which  proceeds 
have  in  this  case  been  placed  before  the  court.  .  .  . 

The  case  of  Coles  v.  Coles,  15  Johns.  Rep.  319,  went  a  step  still 
further,  and  held  that,  where  a  person  seised  of  land  in  fee  mort- 
gages it,  and  afterwards  marries,  his  widow  was  entitled  to  dower 
out  of  that  equity  of  redemption,  against  the  purchaser  of  that 
equity,  though  the  mortgage  was  still  subsisting.  Here  was  a  final 
and  full  establishment  in  our  courts  of  law  of  the  principle,  not 
admitted  in  the  English  courts  of  law,  that  a  wife  could  be  endowed 
of  an  equity  of  redemption  arising  upon  a  mortgage  in  fee,  and 
this  court  ought  to  follow  the  rule  of  law.  It  ought  to  do  so,  ac- 
cording to  the  rule  and  practice  of  the  courts  of  equity  in  England  in 

iThe  rule  was  changed  in  Eng-  by  St.  3  &  4  Wm.  IV,  c.  105 
land   and  dower  thereafter  allowed      (1833). 


STOW   V.    TIFFT  319 

the  like  case,  and  because  the  doctrine  recognizing  the  legal  title 
of  the  mortgagor  before  foreclosure  first  originated  in  this  court, 
and  was  confirmed  in  the  Court  of  Appeals,  and,  finally,  because  it  is 
a  most  just  and  reasonable  doctrine,  and  has  been  so  acknowledged 
throughout  the  history  of  the  cases.^ 


STOW  V.   TIFFT 

Supreme  Court  of  Judicature  of  New  York,  1818 

(15  Johns.  458) 

This  was  an  action  of  dower,  brought  to  recover  dower  in  two 
lots  in  Douglas  patent,  in  the  town  of  Bolton,  in  the  county  of 
Warren.  The  tenant  pleaded  ne  ungues  seisie  que  dower,  and  ne 
ungues  accouple  in  loyal  matrimonie.  The  cause  was  tried  before 
Mr.  J.  Yates,  at  the  Warren  circuit,  in  June,  1817. 

The  marriage  of  the  demandant,  and  the  death  of  her  husband 
in  December,  1804,  were  proved.  Timothy  Stow,  the  husband  of 
the  demandant,  purchased  the  premises  in  question  during  the 
coverture,  and  paid  part  of  the  consideration  money;  and  to  secure 
the  payment  of  the  residue,  executed,  at  the  time  of  receiving  the 
conveyance,  a  mortgage  of  the  same  premises  to  the  grantor;  after 
his  death  the  land  was  sold  under  a  power  contained  in  the  mort- 
gage, and  was  purchased  by  a  person  from  whom  the  tenant  de- 
rived his  title. 

A  verdict  was  found  for  the  demandant,  subject  to  the  opinion 
of  the  court,  on  a  case  containing  the  above  facts. 

Spencer,  J.,  delivered  the  opinion  of  the  court.^  The  demand- 
ant's right  to  recover  her  dower  depends  on  the  nature  of  her  hus- 
band's seisin.  Timothy  Stow,  her  husband,  purchased  the  premises 
in  question  after  his  marriage  with  the  plaintiff,  and  paid  part  of 
the  consideration  money;  and  for  securing  the  residue,  he,  at  the 
time  of  receiving  his  conveyance,  executed  to  the  grantor  a  mort- 
gage of  the  same  premises.  After  his  death  the  premises  were  sold 
under  a  power  contained  in  the  mortgage,  and  the  defendant  holds 
under  that  sale.  The  question  to  be  decided  is  whether  there  was 
such  a  seisin  of  the  husband  of  the  demandant  as  to  entitle  her 

^  This  is  the  general  rule  in  the  ^  Dissenting  opinion  of  Thompson, 

United  States;  but  see  Stelle  v.  Car-      Ch.  J.,  omitted. 
roll,  12  Peters,  201  (1838). 


320  COMMON    LAW   RELATIONS 

to  dower.  This  depends  on  the  single  point  whether  the  seisin  of 
the  husband  was  an  instantaneous  seisin  or  not.  If  it  was  an 
instantaneous  seisin,  then,  according  to  all  the  authorities,  the  wife 
is  not  endowable.  This  general  position  is  met  with  in  all  our 
books,  that  the  husband's  seisin  for  an  instant  does  not  entitle  the 
wife  to  dower.  This  is  exemplified  by  the  case  of  Amcotts  v,  Cathe- 
rick,  Cro.  Jac.  615.  There  the  husband,  who  was  seised  in  special 
tail,  made  a  deed  of  feoffment  to  the  use  of  himself  for  life,  and 
after  to  the  use  of  his  son  in  tail,  and  made  a  letter  of  attorney  to 
make  livery.  Before  livery  he  took  the  demandant  to  wife,  and 
after  Hvery  was  made  to  those  uses  the  husband  died,  and  the 
question  was,  whether  the  wife  was  entitled  to  dower;  and  it  was 
adjudged  that  she  was  not,  for  that  the  livery  did  not  gain  to  the 
husband  any  new  estate,  but  being  eodem  instanti  drawn  out  of 
him,  he  gained  no  seisin  whereof  his  wife  was  dowable;  for  that 
having  no  estate  before  the  feoffment  whereof  the  wife  was  dow- 
able, he  gained  none  by  the  feoffment  of  which  his  wife  could  be 
endowed.  Three  cases  were  there  put  in  which  the  wife  would  not 
be  entitled  to  dower:  as  where  a  tenant  for  life  or  a  joint  tenant 
makes  a  feoffment ;  so  where  a  married  man  took  a  fine  and  by  the 
same  fine  rendered  the  land  to  another  in  tail,  his  wife  shall  not  be 
endowed  thereof,  because,  although  he  took  it  in  fee,  yet  it  is 
instantly  out  of  him;  so  if  a  feoffment  be  made  to  one  and  his 
heirs,  to  the  use  of  another  and  his  heirs,  the  wife  of  the  trustee 
shall  not  be  endowed,  for  he  was  the  mere  instrument  and  had  but 
an  instantaneous  seisin  (2  Co.  77). 

The  case  of  Nash  v.  Preston,  Cro.  Car.  190,  would  seem,  at  first 
view,  to  be  opposed  to  the  proposition  that  a  deed  to  the  purchaser 
and  a  mortgage  given  back  by  him  to  the  grantor  at  the  same  time, 
would  not  entitle  the  wife  of  the  purchaser  to  her  dower;  yet  it  is 
observable  that  the  principle  is  admitted  that  an  instantaneous 
seisin  of  the  husband  does  not  entitle  the  wife  to  dower.  Croke 
admits  that  if  a  husband  take  a  fine  sur  cognisance  de  droit  come 
ceo  and  render  arrear,  although  it  was  once  the  husband's,  yet  his 
wife  shall  not  have  dower,  for  it  is  in  him  and  out  of  him  quad 
uno  flatu  and  by  one  and  the  same  act.  That  case  does  not  state 
that  the  redemise  was  made  at  the  same  time  with  the  bargain  and 
sale,  and  I  presume  it  was  not.  That  case,  therefore,  does  not  bear 
on  the  general  principle. 

I  am  authorized  to  say,  by  the  decision  of  this  court  in  Jackson  v. 
Dunsbagh,  1  Johns.  Cas.  95,  that  where  two  instruments  are  exe- 
cuted at  the  same  time  between  the  same  parties  relative  to  the 


STOW   V.    TIFFT  321 

same  subject-matter,  they  are  to  be  taken  in  connection,  as  forming 
together  the  several  parts  of  one  agreement.  I  entirely  agree  in 
the  opinion  expressed  by  Ch.  J.  Parsons  in  the  case  of  Holbrook 
V.  Finney,  4  Mass.  Rep.  569,  that  where  a  deed  is  given  by  the 
vendor  of  an  estate,  who  takes  back  a  mortgage  to  secure  the  pur- 
chase money  at  the  same  time  that  he  executes  the  deed,  that  there 
the  deed  and  the  mortgage  are  to  be  considered  as  parts  of  the  same 
contract,  as  taking  effect  at  the  same  instant,  and  as  constituting 
but  one  act;  in  the  same  manner  as  a  deed  of  defeasance  forms, 
with  the  principal  deed  to  which  it  refers,  but  one  contract,  al- 
though it  be  by  a  distinct  and  separate  instrument. 

The  substance  of  a  conveyance  where  land  is  mortgaged  at  the 
same  time  the  deed  is  given,  is  this.  The  bargainor  sells  the  land 
to  the  bargainee  on  condition  that  he  pays  the  price  at  the  stipu- 
lated time,  and  if  he  does  not  that  the  bargainor  shall  be  reseised 
of  it,  free  of  the  mortgage;  and  whether  this  contract  is  contained 
in  one  and  the  same  instrument,  as  it  well  may  be,  or  in  distinct 
instruments  executed  at  the  same  instant,  can  make  no  possible 
difference.  It  is  true  that  courts  of  equity  have  interposed  to  re- 
lieve the  mortgagor  against  the  accident  of  his  nonpayment  of  the 
price,  at  the  stipulated  period.  It  is  also  true  that  courts  of  law 
have  considered  the  interest  of  the  mortgagor  as  liable  to  be  sold  on 
execution.  This,  however,  does  not  interfere  with  the  question  as 
to  how  the  conti'act  between  the  original  parties  is  to  be  viewed 
as  between  themselves  when  the  equity  of  redemption  is  gone  and 
forfeited. 

The  opinion  which  the  court  has  formed  receives  decisive  sup- 
port from  the  declaratory  act  of  the  28th  sess.,  ch.  99.  It  recites 
that  whereas  doubts  have  arisen  whether  mortgages  given  to  secure 
the  purchase  money  of  land  sold  and  conveyed  at  the  time  of  the 
execution  of  such  mortgages,  are  to  be  preferred  to  judgments 
previously  obtained  against  the  mortgagors,  for  the  removal 
v/hereof  it  is  enacted  and  declared  that  whenever  lands  are  sold 
and  conveyed  and  a  mortgage  is  given  by  the  purchaser  at  the 
same  time  to  secure  the  payment  of  the  purchase  money,  such  mort- 
gage shall  be  preferred  to  any  previous  judgment  which  may  have 
been  obtained  against  such  purchaser. 

This  statute  conveys  the  sense  of  the  legislature  that  the  seisin 
of  the  mortgagor,  under  the  circumstances  stated  in  the  act,  was 
a  seisin  for  an  instant  only;  for  it  cannot  be  doubted  that  a  judg- 
ment will  attach  on  lands  of  which  the  judgment  debtor  becomes 
seised  at  any  time  posterior  to  the  judgment;  and  nothing  could 


322  COMMON    LAW   RELATIONS 

prevent  a  judgment  creating  a  lien  on  the  subsequently  acquired 
lands  of  the  judgment  debtor  but  the  circumstance  that  his  seisin, 
in  the  given  case,  was  instantaneous.  Surely,  then,  the  analogous 
case  of  dower  cannot  stand  on  a  better  footing  than  a  judgment 
unsatisfied.  As  a  declaratory  act,  this  statute  is  entitled  to  high 
respect;  and  it  fortifies  and  supports  the  position  that  the  demand- 
ant's husband  acquired,  by  the  deed  to  him,  a  seisin,  which  he 
parted  with  eo  instanti  he  acquired  it,  and  that  his  wife  is  not 
endowable  of  the  premises.  The  court  are  very  well  satisfied  that 
the  law  is  so,  for  it  would  be  extremely  inequitable  in  most  cases 
to  claim  dower  on  such  purchases.  We  are,  therefore,  of  opinion 
that  there  must  be  judgment  for  the  defendant. 

Judgment  for  the  defendant} 

EVERSON  V.  McMULLEN 

Court  of  Appeals  of  New  York,  1889 

(113  N.  Y.  293) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  the  third  judicial  department,  entered  upon  an  order 
made  September  13,  1887,  which  affirmed  a  final  judgment  in  favor 
of  plaintiff,  entered  upon  a  decision  of  the  court  confirming  the 
report  of  a  referee,  and  also  modified  and  affirmed,  as  modified,  an 
interlocutory  judgment. 

This  action  was  brought  by  plaintiff,  as  the  widow  of  Morgan 
Everson,  to  recover  dower  in  certain  premises. 

On  the  trial  the  court  held  that  plaintiff's  dower  interest  should 
be  charged  with  its  just  proportion  of  a  mortgage  in  which  she 
joined  with  her  husband,  which  is  set  forth  in  the  opinion,  and 
an  interlocutory  judgment  was  entered  accordingly,  referring  it 
to  a  referee  to  admeasure  the  dower.  The  General  Term,  on  ap- 
peal from  the  interlocutory  judgment,  modified  it,  adjudging  that 
the  mortgage  was  not  to  be  considered  in  the  admeasurement. 

The  material  facts  are  stated  in  the  opinion. 

Finch,  J.  We  are  required  to  settle  on  this  appeal  the  disagree- 
ment between  the  trial  court  at  the  first  hearing  and  the  General 
Term,  and  determine  which  decision  was  correct. 

1  The  cases  generally  are  accord:  made  to  a  third  person:  Clark  v. 
Thomas  v.  Hanson,  44  Iowa,  651  Munroe,  14  Mass.  351  (1817);  Jone» 
(1876);  even  where  the  mortgage  is       v.  Parker,  51  Wis.  218  (1881). 


EVERSON    V.    MCMULLEN  323 

The  property  in  question  was  owned  originally  by  ]M organ 
Everson,  who  mortgaged  it  to  the  Rondout  Savings  Bank  for 
$12,000;  his  wife,  who  is  the  present  plaintiff,  joining  with  him  in 
the  mortgage  to  cover  her  inchoate  right  of  dower.    Everson  died 
soon  thereafter,  and  his  executor  sold  the  equity  of  redemption 
at  public  auction  for  one  dollar.    The  case  does  not  disclose  the 
authority  upon  which  he  acted,  but  nobody  disputes  it,  and  the 
action  was  tried  upon  the  assumption  that  a  valid  title  existed  in 
the  purchaser.    That  purchaser  was  Coykendall,  who  assigned  his 
bid  to  Preston,  to  whom  the  executor's  deed  was  made.    Preston 
took  title  before  August,  1877,  and  thereupon  gave  a  new  mortgage 
to  the  savings  bank  upon  the  property  for  $2,000  to  further  secure 
an  accumulation  of  interest  upon  the  original  mortgage.    It  appears 
that  Preston  gave  a  bond  accompanying  the  mortgage,  and  so 
became  personally  liable  for  a  possible  deficiency,  and  the  bank 
gained  that  additional  security  for  its  unpaid  interest;  but  while 
it  is  said  generally  that  the  mortgage  was  given  to  pay  the  interest, 
it  is  not  shown  that  the  mortgagee  accepted  the  new  securities  as 
a  payment  pro  tanto  upon  the  original  incumbrance  by  any  indorse- 
ment or  equivalent  action,  or  held  them  in  any  other  way  than  as 
collateral  to  the  original  debt.    In  August,  1877,  Preston  and  his 
wife  conveyed  to  Crosby  by  a  quit-claim  deed,  but  containing  a 
provision  by  which  the  latter  assumed  and  agreed  to  pay  the  $2,000 
mortgage  given  by  Preston  to  the  bank,  as  a  part  of  the  considera- 
tion for  the  purchase.    The  consideration  named  in  the  deed  was 
$221.    Preston  did  not  on  his  purchase  assume  or  become  liable 
to  pay  any  part  of  the  original  mortgage,  but  took  title  merely 
subject  to  its  lien.    When  he  gave  his  $2,000  bond  and  mortgage 
it  was  in  aid  of  his  own  title,  and  not  in  pursuance  of  any  duty  due 
to  the  representatives  of  the  mortgagor.    Probably  his  obligation 
was  merely  collateral  to  the  primary  lien,  and  so  both  he  and  his 
land  became  sureties  for  the  unpaid  interest;  but  if  not,  and  the  new 
mortgage  was  a  payment  of  so  much  of  the  old  debt,  it  was  entirely 
voluntary,  and  he,  and  Crosby  who  took  his  place,  stood  in  the 
attitude  of  sureties  after  paying  the  unpaid  interest,  entitling  them 
to  subrogation  as  against  the  land.    Crosby  thereafter  conveyed 
a  portion  of  the  property  to  McMullen  by  a  warranty  deed,  free 
and  clear  of  all  incumbrance.     He  was  enabled  to  do  this  by  an 
arrangement  at  the  time,  to  which  his  grantee  and  the  bank  were 
parties.    The  substantial  point  of  that  arrangement  was  a  distribu- 
tion of  the  original  mortgage,  in  agreed  proportions  between  the 
two  parcels  into  which,  by  McMullen's  purchase,  the  land  was  to 


324  COMMON    LAW    RELATIONS 

be  divided.  To  effect  this  separation  and  severance  of  the  lien, 
McMullen  gave  the  bank  a  mortgage  on  his  parcel  for  $5,500  as 
a  substitute  for  $4,000  of  the  principal  of  the  original  mortgage, 
and  of  the  unpaid  interest  collaterally  secured  by  the  bond  and 
mortgage  of  Preston,  $500  of  the  interest  having  been  paid  in  cash 
by  Crosby.  The  bank  on  its  part  formally  released  McMuUen's 
parcel  from  the  lien  of  its  original  mortgage,  indorsing  thereon  a 
payment  of  $4,000,  and  cancelled  and  discharged  the  $2,000 
mortgage  of  Preston,  and  Crosby  was  thus  enabled  to  make  his 
conveyance  free  from  incumbrance. 

On  this  state  of  facts  the  widow  demanded  dower  in  McMullen's 
parcel.  The  Special  Term,  on  the  first  trial,  held  that  she  was 
bound  to  allow  as  against  her  dower  a  just  proportion  of  the  original 
mortgage  and  its  interest,  and  sent  the  case  to  a  referee  to  ascertain 
that  just  proportion,  with  a  direction  that  the  McMullen  mortgage 
should  be  recognized  and  allowed  in  ascertaining  the  amount  of 
such  indebtedness.  The  General  Term,  on  the  contrary,  were  of 
opinion  that  the  widow  was  not  bound  to  contribute,  and  should 
have  dower  in  the  whole  parcel  without  allowance  or  diminution; 
and  it  is  that  controversy  which  awaits  our  judgment.  It  is  not 
doubtful  on  which  side  the  equity  exists.  The  widow  subordinated 
her  dower  to  the  payment  of  the  husband's  debt.  Whoever,  in  the 
room  of  a  foreclosure  by  the  mortgagee,  pays  that  debt  to  him 
when  under  no  personal  liability  for  its  discharge,  is  entitled  in 
equity  to  the  protection  of  the  mortgagee's  right  as  against  the 
dower  which  it  covered  and  charged.  The  purchaser  from  the 
husband  acquired  only  the  equity  of  redemption.  While,  techni- 
cally, he  took  the  fee,  in  truth  he  took  it  subject  to  the  interest  of 
the  mortgagee  carved  out  of  it  by  the  mortgage  as  a  lien.  Payment 
to  the  mortgagee  in  an  equitable  sense,  is  a  purchase  of  that  interest 
from  him,  and  in  equity  the  owner  of  the  fee  holds  it  under  the 
mortgagee  as  to  that  interest,  and  under  the  husband  onlj'  as  to  the 
equity  of  redemption.  That  is  an  answer  to  the  doctrine  invoked 
by  the  respondent  that  a  release  of  dower  is  available  only  to  one 
who  claims  under  the  very  title  which  was  created  by  the  convey- 
ance with  which  the  release  is  joined  (Malloney  v.  Horan,  49  N.  Y. 
118).  That  would  be  a  good  answer  to  the  appellant's  claim  in 
a  court  of  law,  possibly,  but  does  not  govern  his  case  in  equity, 
since  there  the  truth  of  his  holding,  outside  of  the  legal  form,  is 
under  the  mortgage  to  the  extent  of  the  mortgage  debt.  For  his 
payment  of  that  debt  is  not  a  duty  which  he  owes  to  the  husband's 
estate  or  to  any  one,  but  a  transaction  in  his  own  interest,  the  exact 


EVERSON    V.    MCMULLEN  325 

and  obvious  purpose  of  whicli  is  to  add  the  right  of  the  mortgagee 
to  the  right  bought  of  the  husband.  The  widow  is  left  where  her 
own  voluntary  act  placed  her.  By  joining  in  the  mortgage  she 
postponed  her  dower  to  the  equity  of  redemption.  She  has  that 
right  still,  and  seeks  to  enlarge  it  because  of  a  payment  made  not 
by  her  husband,  or  in  performance  of  a  duty  due  to  him  or  those 
representing  him,  but  by  one  acting  wholly  in  his  own  interest  and 
seeking  to  add  to  that  as  acquired  from  the  husband  the  further 
right  held  by  the  mortgagee.  The  purchaser  in  the  present  case 
took  his  land  charged  as  surety  for  the  husband's  debt.  While  he, 
personally,  was  not  bound  to  pay  it,  his  land  was  held,  and  paying 
the  debt  of  husband  and  wife,  as  represented  by  the  mortgage,  he 
had  a  right,  as  against  them,  to  be  subrogated  to  the  position  of  the 
mortgagee  and  to  stand  in  equity  as  the  purchaser  and  holder  of  his 
security. 

Thus  far  I  have  assumed  that  the  giving  of  the  new  mortgage 
operated  as  a  payment,  jpro  tanto,  of  that  held  by  the  bank.  That 
is  a  needless  concession,  because  the  finding  in  this  case  rebuts 
any  intention  of  payment,  and  establishes  that  a  severance  of  the 
oiiginal  lien  was  all  that  was  contemplated  by  the  parties,  and  the 
giving  of  the  new  mortgage  was  meant,  in  its  practical  effect,  to 
serve  as  a  transfer  of  so  much  of  the  original  Hen  to  the  severed 
parcel.  Equity  may  look  through  the  form  of  the  transaction  to 
ascertain  its  substance,  and  so  looking  cannot  fail  to  see  that  the 
new  mortgage  is  so  much  of  the  old  one  in  a  changed  form,  but 
secures  the  old  debt  as  did  its  predecessors.  The  finding  is  justified 
by  the  facts,  and  upon  that  basis  the  dower  remains  subject  to  the 
proportionate  part  of  the  original  lien. 

I  think  these  views  are  fully  sustained  by  the  authorities.  In 
Swaine  v.  Perrine,  5  Johns.  Ch.  491,  the  mortgage  given  by  the 
husband  and  wife  was  outstanding  at  his  death;  the  equity  of 
redemption  passed  to  the  heir  who  redeemed  the  land  bj^  paying 
the  mortgage,  and  the  widow  who  claimed  dower  was  required  to 
contribute  her  ratable  proportion  of  the  redemption  money.  In 
Popkin  v.  Bumstead,  8  Mass.  491,  the  husband  and  wife  joined 
in  a  mortgage  to  one  Capen,  and  after  the  death  of  the  huslmnd 
his  administrator,  under  the  order  of  the  probate  court,  sold  the 
equity  of  redemption  to  Wheelock,  who  conveyed  it  to  Bumstead. 
The  latter  paid  off  the  mortgage  and  it  was  discharged  of  record. 
The  widow  thereupon  demanded  her  dower,  but  the  court  held 
she  was  barred.^  This  case,  which  is  very  like  the  one  at  l)ar,  was 
1  Cf.  Eaton  v.  Simonds,  14  Pick.  (Mass.)  98  (1833). 


326  COMMON   LAW  RELATIONS 

cited  in  Van  Dyne  v.  Thayre,  19  Wend.  171,  with  apparent  approval. 
Judge  Cowen  reviews  many  of  the  cases  and  holds  that  Collins  v. 
Torn/,  7  Johns.  278,  and  Coates  v.  Cheever,  1  Cow.  475,  were 
decided  without  full  consideration.  Near  the  close  of  his  opinion 
he  says:  "My  deduction  from  this  and  other  cases,  I  state  in  the 
words  of  Chancellor  Kent  (4  Comm.  45,  3d  ed.),  the  wife's  dower 
in  the  equity  of  redemption  only  applies  in  case  of  redemption  of 
the  incumbrance  by  the  husband  or  his  representatives,  and  not 
when  the  equity  of  redemption  is  released  to  the  mortgagee  or 
conveyed."  I  am  not  aware  that  the  authority  of  that  case  has 
been  overthrown. 

The  cases  cited  in  behalf  of  the  widow  confirm  rather  than  ques- 
tion the  views  we  have  expressed.  In  Bartlett  v.  Musliner,  28  Hun, 
235,  the  purchaser  had  assumed  and  agreed  to  pay  the  mortgage 
debt  as  a  condition  of  his  purchase,  and,  having  come  under  that 
obligation,  might  be  deemed  to  have  paid  in  behalf  of  the  husband 
or  his  estate.  The  distinction  is  referred  to  in  Jones  on  Mortgages, 
vol.  1,  §  866,  where  it  is  said  that,  if  the  mortgage  "be  redeemed 
by  the  heir  or  purchaser,  or  by  any  one  interested  in  the  estate  who 
is  not  bound  to  pay  the  debt,  to  avail  herself  of  this  right  she  must 
contribute  her  proportion  of  the  charge  according  to  the  value  of 
her  interest."  In  Runyan  v.  Stewart,  12  Barb.  537,  the  action  was 
at  law,  and,  while  a  majority  of  the  court  sustained  the  claim  of 
dower,  it  was  explicitly  said  that  the  result  would  be  different 
in  equity.  In  that  case  Runyan  and  his  wife  gave  a  mortgage,  and 
thereafter  the  husband  gave  a  conveyance  to  Baker,  who  assumed 
the  payment  of  the  mortgage.  The  court  question  the  case  of 
Popkin  V.  Bumstead  (supra),  but  add  that,  in  equity,  Baker  might 
be  subrogated  and  have  a  decree  for  contribution.  No  reference 
was  made  to  the  assumption  of  the  mortgage  by  Baker.  In  Jackson 
V.  Dewitt,  6  Cow.  316,  there  was  a  release  to  the  mortgagee  and 
dower  was  denied..  In  Wedge  v.  Moore,  6  Cush.  8,  the  whole  argu- 
ment is  founded  upon  an  assumption  of  the  mortgage  debt  by  the 
purchaser,  which  is  argued  out  from  the  facts.  In  Plait  v.  Brick, 
35  Hun,  127,  the  action  was  by  the  purchaser  of  the  equity  of 
redemption,  who  was  not  bound  to  pay  the  mortgage  debt,  to  com- 
pel the  mortgagee  to  assign  his  mortgage  for  the  protection  of  the 
purchaser's  title  against  dower,  its  amount  having  been  tendered. 
The  court  held  that  the  assignment  could  be  compelled;  that  there 
was  a  right  of  subrogation;  that  the  assignment  would  not  work 
a  merger,  and  the  mortgage  could  be  interposed  against  the  claim 
of  dower.    Of  course,  the  technical  or  formal  assignment  is  material 


NEW  YORK  REAL  PROPERTY  LAW  327 

only  as  showing  a  transfer  rather  than  a  payment,  and  where  no 
payment  was  intended  or  made,  but  the  mortgage  debt  subsisted 
in  the  new  mortgage  given,  the  result  must  be  the  same. 

On  the  whole,  I  am  satisfied  that  where  the  purchaser  of  the 
equity  of  redemption  is  not  bound  to  pay  the  mortgage  debt,  but 
does,  in  fact,  pay  it  in  aid  of  his  own  title  .and  estate,  whereby  it  is 
discharged,  the  claim  of  dower  is  subject  to  a  just  contribution. 
And  the  case  is  stronger  where,  as  here,  the  technical  payment 
consists  in  the  substitution  of  a  new  mortgage  intended  to  operate 
as  and  take  the  place  of  so  much  of  the  old  one.  The  debt  to  which 
the  dower  was  subordinated  is  changed  in  form,  but,  in  fact, 
remains,  and  the  discharged  security  may  be  revived  when  equity 
so  requires  (Gans  v.  Thieme,  93  N.  Y.  225). 

The  judgment  of  the  General  Term  and  of  the  Special  Term 
should  be  reversed  and  a  new  trial  granted,  costs  to  abide  event. 

All  concur. 

Judgment  reversed. 


New  York  Real  Prop.  Law,  §  192.  Where  a  person  seized  of 
an  estate  of  inheritance  in  lands  executes  a  mortgage  thereof,  before 
marriage,  his  widow  is,  nevertheless,  entitled  to  dower  of  the  lands 
mortgaged,  as  against  eveiy  person  except  the  mortgagee  and  those 
claiming  under  him.^ 

§  193.  Where  a  husband  purchases  lands  during  the  marriage, 
and  at  the  same  time  mortgages  his  estate  in  those  lands  to  secure 
the  payment  of  the  purchase-money,  his  widow  is  not  entitled  to 
dower  of  those  lands,  as  against  the  mortgagee  or  those  claiming 
under  him,  although  she  did  not  unite  in  the  mortgage.  She  is 
entitled  to  her  dower  as  against  every  other  person.- 

§  195.  A  widow  shall  not  be  endowed  of  the  lands  conveyed 
to  her  husband  by  way  of  mortgage,  unless  he  acquires  an  absolute 
estate  therein,  during  the  marriage.^ 

'  Similar  provisions  are  contained  (1889),  §  2162.     And  see  Ind.  Ann. 

in  the  statute  law  of  other  States.  Stat.  (1894),  §2652. 
Maine,   Rev.   Stat.    (1883),    c.    103,  ^  ind.  Ann.  Stat.   (1894),   §2656; 

§  12;  Mass.  Pub.  Stat.  (1882),  c.  124,  111.   Ann.   Stat.    (1896),    c.   41,    §4; 

§5;  Verm.  Stat.  (1894),  §2529;  111.  Mich.    Stat.    (1882),    §5736;    Wis. 

Ann.  Stat.  (1896),  c.  41,  §3;  Mich.,  Ann.  Stat.  (1889),  §2163,  accord. 
Stat.  (1882),  §  5735;  Wis.  Ann.  Stat.  » lU.  Ann.  Stat.  (1896),  c.  41,  §  6. 


CHAPTER   I.     (Continued) 
Section  IV. — Fixtures 

WALMSLEY  v.  MILNE 

Court  of  Common  Pleas,  1859 

(7  C.B.  [n.  s.]  115) 

Crowder,  J.,  now  delivered  the  judgment  of  the  court: 

This  was  an  action  by  the  assignees  of  a  bankrupt,  to  recover 
/from  the  defendant  certain  articles  alleged  to  be  part  of  the  bank- 
rupt's estate.  It  was  tried  before  my  Brother  Byles  at  the  last 
Spring  Assizes  at  Liverpool,  when  a  verdict  was  found  for  the 
plaintiff,  with  liberty  to  move  to  enter  a  verdict  for  the  defendant. 

The  facts  were  these:  Moore,  the  bankrupt,  being  the  owner  of 
a  vacant  plot  of  ground,  in  1853  mortgaged  it  in  fee  to  one  Oswald, 
who,  in  August,  1858,  sold  to  the  defendant  the  mortgaged  prem- 
ises. Moore  became  bankrupt  in  September,  1858.  Subsequentl}^ 
to  the  mortgage,  and  before  the  sale  in  1858,  Moore,  who  had 
always  continued  in  possession,  erected  various  buildings  upon  the 
plot  of  ground,  and  set  up  all  the  articles  sought  to  be  recovered  in 
this  action.  They  consisted  of  a  steam-engine  and  boiler  used  for 
the  purpose  of  supplying  with  sea-water  the  baths  which  had  been 
erected  on  the  premises;  also  a  hay-cutter  and  malt-mill  or  corn- 
crusher,  and  grinding-stones,  all  (except  the  grinding-stones)  being 
screwed  with  bolts  and  nuts,  or  otherwise  firmly  affixed  to  the 
several  buildings  to  which  they  were  attached,  but  still  in  such  a 
manner  as  to  be  removable  without  damage  to  the  buildings  or  to 
the  things  themselves.  The  upper  mill-stone  lay  in  the  usual  way 
upon  the  lower  grinding-stone.  All  these  fixtures  were  put  up  for 
the  purposes  of  trade. 

The  rule  was  argued  before  my  Brother  Willes  and  Byles  and 
myself;  and  in  the  course  of  the  argument  a  great  many  cases  were 
cited,  which  we  desired  time  to  consider  before  delivering  our  judg- 
ment. 

On  the  part  of  the  plaintiffs  it  was  contended,  first,  that  the 
articles  in  question  were  not  fixtures  at  all,  because  not  permanently 
328 


WALMSLEY    V.    MILNE  329 

attached  to  the  freehold,  but  simply  movable  chattels,  which  there- 
fore passed  to  the  assignees  of  the  bankrupt;  ^  or,  secondly,  that,  if 
fixtures,  they  were  trade  fixtures,  and  therefore  removable  by  the 
bankrupt,  and  so  would  pass  to  his  assignees. 

But,  secondly,  it  was  contended  on  the  part  of  the  plaintiffs  that, 
assuming  the  articles  in  question  to  have  been  so  affixed  as  not  to  be 
removable  according  to  the  general  rule  of  law,  yet  that,  as  they 
were  trade  fixtures,  they  might  be  removed,  and  so  would  pass  to 
the  bankrupt's  assignees. 

The  whole  of  the  plaintiffs'  argument  upon  this  head  was  founded 
upon  the  well-established  exception  to  the  general  rule,  that,  where 
a  tenant  puts  up  fixtures  for  the  purpose  of  trade  durmg  his  term, 
he  may  beforc^^its  cxprration,  withPTrTThe  consoirTbf  his  landlord. 


^dkunite  them  from  the  freehold.  The  defendant's  counsel  were 
quite  ready  to  admit  the  validity  of  the  numerous  authorities  sup- 
porting that  proposition,  and  to  concede  to  the  plaintiffs,  that,  if 
the  bankrupt  had  been  tenant  to  the  mortgagee  for  a  term,  and  the 
bankruptcy  had  happened  before  its  expiration,  the  fixtures  in 
question  were  such  as  would  have  passed  to  the  assignees.  But 
they  denied  that  any  such  tenancy  existed  in  the  present  case.  And 
this  leads  us  to  the  consideration  of  the  peculiar  relationship  exist- 
ing between  a  mortgagor  in  possession  and  the  mortgagee,  which  it 
is  really  difficult  to  express  in  any  other  legal  terms.  A  mortgagor 
in  possession  has  been  called  sometimes  a  tenant  at  will  to  the 
mortgagee,  or  a  tenant  at  sufferance,  or  like  a  tenant  at  will:  but  he 
has  never  been  designated  as  tenant  for  any  term.  Lord  Ellen- 
borough  in  Thunder  d.  Weave?'  v.  Belcher,  3  East,  449,  called  him 
a  tenant  at  sufferance;  and  Lord  Tenterden,  in  Doe  d.  Robey  v. 
Maisey,  8  B.  &  C.  767  (E.  C.  L.  R.  vol.  15),  3  M.  &  R.  107,  said— 
"The  mortgagor  is  not  in  the  situation  of  tenant  at  all,  or,  at  all 
events,  he  is  not  more  than  tenant  at  sufferance;  but  in  a  peculiar 
character,  and  liable  to  be  treated  as  tenant  or  as  trespasser,  at  the 
option  of  the  mortgagee."  He  is  clearly  not  a  tenant  at  will,  be- 
cause he  may  be  ejected  without  any  notice  or  demand  of  posses- 
sion, and  is  not  entitled  to  the  growing  crops. 

All  the  cases,  therefore,  which  show  that,  where  a  tenant  for 
years  has  put  up  trade-fixtures,  he  may  remove  them  before  his 
tenancy  expires,  have  no  application  to  the  case  at  Bar. 

In  Ex  parte  Belcher,  4  Deac.  &  Ch.  703,  which  was  decided  in  the 
Court  of  Review  in  1835,  it  was  held  that  fixtures  annexed  to  the 
freehold  after  the  mortgage  by  the  mortgagor  in  possession,  and 
1  This  portion  of  the  opinion  is  omitted. 


330  COMMON    LAW   RELATIONS 

which,  as  between  landlord  and  tenant,  would  have  been  removable 
if  put  up  by  the  tenant,  became  part  of  the  freehold,  and  did  not 
pass  to  the  assignees  of  the  bankrupt  mortgagor.  The  Chief  Judge 
(afterwards  Mr.  Justice  Erskine)  there  says  after  adverting  to 
the  relaxation  of  the  general  rule  of  law  in  favour  of  trade  fixtures 
put  up  by  the  tenant,  "But  that  is  not  the  present  case.  Again,  it 
is  said  that  the  property  in  question  did  not  pass  by  the  mortgage 
deed.  Now,  it  always  appeared  to  me  that,  where  the  owner  of  the 
inheritance  affixes  property  to  it,  it  becomes  a  fixture  in  the  general 
sense  of  the  term,  and  part  of  the  freehold;  and,  if  the  inheritance 
be  afterwards  sold  or  let,  it  goes  with  the  freehold;  and  I  confess 
I  see  no  distinction,  for  this  purpose,  whether  the  deed  be  one  of 
absolute  conveyance,  lease,  or  mortgage.  A  mortgage,  therefore, 
made  by  the  owner  of  the  inheritance,  will,  without  naming  them, 
pass  all  the  fixtures  thereon."  And,  in  another  part  of  his  judg- 
ment, he  says:  "Again,  it  is  urged  that,  as  to  those  articles  which 
were  attached  after  the  execution  of  the  mortgage  deed,  they  could 
not  pass  to  the  mortgagee.  But  there  has  not  been  cited  any  au- 
thority, or  even  dictum,  for  such  a  proposition.  I  confess  I  know 
no  case  which  goes  so  far  as  to  determine,  or  even  to  intimate  an 
opinion,  that,  where  a  mortgagor  in  possession  alters  the  premises 
by  addition  or  otherwise,  the  mortgagee  shall  not  take  the  benefit 
of  such  alteration.  I  can  find  no  distinction,  therefore,  substan- 
tially, between  those  which  were  affixed  before  and  those  affixed 
after  the  date  of  the  mortgage  deed.  In  that  point  of  view  also,  I 
am  of  opinion  that  all  the  fixtures  alike  passed  to  the  mortgagee." 

We  think,  therefore,  that,  when  the  mortgagor  (who  was  the  real 
owner  of  the  inheritance)  after  the  date  of  the  mortgage  annexed 
the  fixtures  in  question  for  a  permanent  purpose  and  for  the  better 
enjoyment  of  his  estate,  he  thereby  made  them  part  of  the  freehold 
which  had  been  vested  by  the  mortgage  deed  in  the  mortgagee;  and 
that,  consequently,  the  plaintiffs,  who  are  assignees  of  the  mort- 
gagor, cannot  maintain  the  present  action. 

The  verdict,  therefore,  must  be  entered  for  the  defendant. 

Rule  absolute} 

^Winslow  V.  Merchants'  Insurance  265  (1887);  McFadden  v.  Allen,  134 

Co.,    4    Met.    (Mass.)    306    (1842);  N.   Y.   489   (1892),   accord.     So  are 

Roberts  v.  Dauphin  Bank,  19  Pa.  St.  the  cases  generally.    But  see  Clare  v. 

71  (1852);  Foote  v.  Gooch,  96  N.  C.  Lambert,  78  Ky.  224  (1879),  contra. 


CLARY   V.    OWEN  331 

CLARY  V.   OWEN 

Supreme  Judicial  Court  of  Massachusetts,  1860 

(15  Gray,  522) 

Action  of  tort  by  the  assignee  in  insolvency  of  Heman  D.  Burg-  i 
hardt,  for  the  conversion  of  four  water-wheels,  with  the  shafts, 
couplings  and  other  machinery  connected  with  them.    At  the  trial 
in  the  superior  court  the  plaintiff  introduced  evidence  of  the  follow- 
ing facts : 

In  1854  Burghardt  contracted  with  John  E.  Potter,  who  then 
owned  certain  real  estate  in  Barrington,  to  furnish  the  water-wheels 
and  machinery,  and  to  set  them  up  in  wheel-pits  to  be  prepared 
by  Potter  on  the  premises,  for  the  sum  of  $3,500,  of  which  $500  was 
paid  at  once,  and  the  balance  was  to  be  paid  on  the  completion  of 
the  work,  in  notes  secured  by  a  mortgage  of  the  property,  or  by  a 
mechanic's  hen.  In  the  latter  part  of  1854,  Burghardt,  in  pursu- 
ance of  this  contract,  constructed  the  wheels  in  question,  which 
were  made  of  cast-iron  and  placed  in  pairs  upon  cast-iron  shafts, 
and  set  them  up  in  penstocks  and  a  flume,  the  frame  of  vvhich 
rested  on  a  stone  foundation  built  by  Potter  in  all  respects  like  the 
foundation  of  a  building.  The  wheels  were  intended  for  the  pur- 
pose of  driving  a  paper-mill  on  the  premises;  they  were  outside  of 
the  paper-mill  building,  but  the  mill  could  not  be  used  without 
them. 

In  January,  1855,  before  the  completion  of  the  wheels  and  fix- 
tures, the  mill  was  destroyed  by  fire;  Potter  failed  and  abandoned 
the  work;  and  Burghardt  never  fulfilled  his  contract  and  never  re- 
ceived any  payment  or  security,  except  the  $500  paid  at  the  time  of 
making  the  contract;  never  delivered  the  wheels,  except  in  so  far  as 
setting  them  up  as  above  described  amounted  to  a  delivery;  never 
offered  to  return  the  money  which  he  had  received,  and  never 
called  on  Potter  for  any  payment.  When  the  contract  was  made 
the  premises  were  subject  to  certain  mortgages,  which  were  after- 
wards assigned  to  the  defendants,  who  had  previously  had  notice 
that  Burghardt  claimed  to  own  the  wheels  and  machinery,  and  who, 
a  year  after  the  fire,  took  possession  of  the  premises,  which  were  in 
the  condition  in  which  the  fire  had  left  them,  to  foreclose  the  mort- 
gages, and  afterwards  purchased  the  equity  of  redemption. 

Upon  this  evidence  Putnam,  J.,  ruled  that,  the  wheels  having 
been  placed  on  the  premises  after  the  execution  of  the  mortgages. 


332  COMMON    LAW   RELATIONS 

the  action  could  not  be  maintained.  The  plaintiff  then  offered  to 
show  that,  by  the  agreement  between  Burghardt  and  Potter,  the 
wheels  were  to  remain  the  property  of  the  former  until  completed 
and  payment  for  them  secured  by  mortgage;  but  the  judge  ruled 
that,  even  if  that  were  proved,  the  plaintiff  could  not  maintain  his 
action,  and  directed  a  verdict  for  the  defendants,  which  was  re- 
turned, and  the  plaintiff  alleged  exceptions. 

Hoar,  J.  It  is  conceded  in  the  argument  of  the  plaintiff's  counsel, 
that  the  mill-wheels,  for  the  value  of  which  this  action  was  brought, 
must  be  considered,  as  between  mortgagor  and  mortgagee,  fix- 
tures belonging  to  the  realty.  They  were  essential  to  the  operation 
of  the  mill,  and  were  intended,  when  completed  and  paid  for,  to  be 
permanently  attached  to  the  land.  If  the  mortgagor  had  himself 
annexed  them  to  the  freehold,  there  could  be  no  doubt  that  the 
mortgagee  would  hold  them  under  his  mortgage,  and  that  they 
could  not  be  severed  without  his  consent  (Winslow  v.  Merchants' 
Ins.  Co.,  4  Met.  306).  But  it  is  contended  that  the  mortgagor 
being  in  possession,  and  having  agreed  with  Burghardt  that  the 
wheels  should  remain  the  personal  property  of  the  builder  until 
they  were  completed  and  provision  made  for  paying  for  them,  the 
wheels,  having  been  set  up  under  this  agreement,  could  not  be 
claimed  and  held  by  the  mortgagee. 

/    If  this  position  were  tenable,  it  would  follow  that  the  mortgagor 
/could  convey  to  another  a  right  in  the  mortgaged  premises  greater 
I  than  he  could  exercise  himself.    But  it  is  well  settled  that,  although 
I  the  mortgagor,  for  some  purposes,  and  as  to  all  persons  except  the 
m^rtgagee^av  be  regaraed  as  the  absolute  owner  of  the  land,  yet 
the  title  of  tHeliiort^li^e  fe  tfTSlfrespects  to  be  treated  as  para- 
mount.    The  mortgagor  cannot  make  a  lease  which  witt^be  valid 
agamSt  the  mortgagee;  and  if  the  mortgagee  enter,  neither  the 
mortgagor  nor  his  lessee  will  be  entitled  to  emblements  (Pow. 
Mortg.,  c.  7;  Keech  v.  Hall,  1  Doug.  21;  Lane  v.  King,  8  Wend.  584; 
Mayo  V.  Fletcher,  14  Pick.  525).    And  we  think  it  is  not  in  the 
[power  of  the  mortgagor,  by  any  agreement  made  with  a  third  per- 
Ison  after  the  execution  of  the  mortgage,  to  give  to  such  person  the 
'  right  to  hold  anything  to  be  attached  to  the  freehold,  which  as  be- 
tween mortgagor  and  mortgagee  would  become  a  part  of  the  realty. 
The  entry  of  the  mortgagee  would  entitle  him  to  the  full  enjoy- 
ment of  the  premises,  with  all  the  additions  and  improvements 
made  by  the  mortgagor  or  by  his  authority. 

Whether  a  person  putting  a  building  upon  land  by  license  of  the 


BRENNAN    V.    WHITAKER 


333 


mortgagor,  under  such  circumstances  that  it  would  remain  his 
personal  property  as  against  the  mortgagor,  would  be  allowed  in 
equity  to  maintain  a  bill  to  redeem,  if  the  mortgagee  should  enter, 
is  a  question  involving  very  different  considerations.  A  tenant 
under  a  lease  may  redeem,  to  protect  his  interest  (Rev.  Sts.,  c.  107, 
§  13;  Bacon  v.  Bowdoin,  22  Pick.  401). 

It  has  been  suggested  that  the  defendants  cannot  avail  them- 
selves of  their  title  as  mortgagees,  because  they  acquired  the  title 
of  the  mortgagor  also,  and  therefore  the  mortgages  are  to  be  re- 
garded as  paid  or  merged.  But  it  has  been  often  decided  that  the 
purchaser  of  an  equity  of  redemption  may  take  an  assignment  of  i 
the  mortgage,  and  may  keep  the  legal  and  equitable  titles  distinct,! 
at  his  election,  if  he  has  any  interest  in  so  doing,  so  that  they  shall] 
not  merge  by  unity  of  possession.  And  a  release  of  an  equity  of 
redemption  operates  as  an  extinguishment  of  the  equity  of  redemp- 
tion, and  not  as  a  merger  of  the  estate  conveyed  by  the  mortgage 
{Loud  V.  Lane,  8  Met.  517). 

Exceptions  overruled} 


BRENNAN  v.  WHITAKER 
Supreme  Court  of  Ohio,  1864 


(15  Oh.  St.  446) 


Error  to  the  district  court  of  Lucas  County. 

The  original  action  was  prosecuted  by  the  Brennans,  plaintiffs, 
in  the  Couit  of  Common  Pleas  of  Lucas  County,  to  recover  from 
Whitaker  and  Phillips,  defendants,  damages  for  the  alleged  wrong- 
ful conversion  by  the  defendants  of  two  steam  engine  boilers, 
one  large  steam  engine,  a  quantity  of  mill  shafting,  one  drum,  one 
balance  wheel,  the  gearing  for  an  upright  saw,  one  muley  saw  and 
the  gearing,  and  one  pony  engine. 


1  Meagher  v.  Hayes,  152  Mass. 
228  (1890);  Bass  Foundry  Works  v. 
Gallentine,  99  Ind.  525  (1884);  Cun- 
ningham V.  Cureton,  96  Ga.  489  (1895) 
accord. 

But  cf.  Hunt  V.  Bay  State  Iron 
Co.,  97  Mass.  279  (1879);  Porter 
V.    Pittsburgh   Steel   Co.,    122   U.    S. 


267  (1886).  In  Hunt  v.  Bay  State 
Iron  Co.,  supra,  the  Massachusetts 
Court  laid  stress  on  the  question  as 
to  whether  the  mortgagee  had  notice 
of  the  agreement  and  referred  the 
case  to  a  master  "to  ascertain  all 
the  facts  as  to  notice." 


334  COMMON    LAW   RELATIONS 

The  facts,  as  they  appear  in  the  record,  are  substantially  as 
follows : 

On  the  9th  of  July,  1857,  Farley  &  Ketcham,  parties  of  the  first 
part,  executed  a  mortgage  to  the  plaintiffs,  parties  of  the  second 
pait,  by  which  "the  said  parties  of  the  first  part,  for  and  in  con- 
sideration of  the  sum  of  $1231.51,  to  them  in  hand  paid  by  the  said 
parties  of  the  second  part  ...  do  grant,  bargain  and  sell  unto 
the  said  parties  of  the  second  part,  all  and  singular  the  goods  and 
chattels  hereinafter  described,  that  is  to  say:  The  steam  engine 
boilers  now  in  the  possession  of  said  parties  of  the  first  part,  de- 
signed to  be  used  in  their  saw-mill  in  Oregon  township,  Lucas 
County,  Ohio,  being  the  same  purchased  by  them  of  the  said  J.  &  J. 
Brennan  this  day,  together  with  the  engines  and  machinery  at- 
tached to  said  boilers.  To  have  and  to  hold  all  and  singular  the 
said  goods  and  chattels  hereinbefore  bargained  and  sold,  or  men- 
tioned, or  intended  so  to  be,  unto  the  said  parties  of  the  second 
part  forever;  said  goods  and  chattels  now  remaining  and  contin- 
uing in  the  possession  of  the  said  parties  of  the  first  part,  in  said 
Lucas  County,  Ohio." 

The  mortgage  was  given  to  secure  the  payment  of  the  note  of 
Farley  &  Ketcham  to  the  plaintiffs,  bearing  the  date  of  the  mort- 
gage, for  the  sum  of  $1231.51,  payable,  with  the  interest,  in  one 
year,  it  being  the  amount  due  for  the  purchase  money  of  the  boil- 
ers mortgaged,  and  was  subject  to  the  condition  that  if  default  was 
made  in  the  payment  of  the  note  according  to  its  tenor,  the  plain- 
tiffs might  "enter  upon  the  premises  of  the  said  parties  of  the  first 
part  at  any  place  or  places  where  the  said  goods  and  chattels  or 
any  part  thereof  may  be,  and  take  possession  thereof,  whether  the 
same  shall  have  been  attached  to  the  freehold,  and  in  law  become 
a  part  of  the  realty  or  not,  and  to  remove  the  same  to  any  place 
or  places  they  may  deem  best,  and  to  sell  and  dispose  of  the  same." 

The  mortgage  was  filed  in  the  office  of  the  recorder  of  Lucas 
County,  on  the  9th  of  July,  1857,  and  copies,  with  the  requisite 
statements,  again  filed  by  the  plaintiffs  in  the  same  place  each  year 
thereafter  up  to  the  time  of  the  commencement  of  this  action. 

After  the  execution  of  the  mortgage,  the  boilers  were  put  bj'- 
Farley  &  Ketcham  into  a  saw-mill,  erected  by  them  on  land  of 
which  they  were  the  owners  in  fee.  They  were  placed  in  an  engine 
house,  built  principally  of  brick,  on  one  side  of  and  attached  to  the 
main  building  of  the  mill.  The  roof  of  the  mill  extended  over  and 
formed  the  covering  of  the  engine  house.  The  boilers  were  placed 
— one  end  on  a  cast-iron  frame,  called  the  fire-front,  which  formed 


BRENNAN   V.    WHITAKER  335 

the  front  of  the  furnace,  and  stood  upon  brick,  the  other  end  on 
iron  stands  also  resting  on  the  brick.  Under  the  boilers  were  built; 
to  support  them,  piers  of  brick,  and  the  whole  was  inclosed  in  brick 
arches  nearly  surrounding  the  boilers,  one  end  of  which  came  up 
to  the  fire-frame,  and  the  other  was  built  into  the  end  brick  wall 
of  the  building.  Usually  the  boilers  are  attached  to  the  fire-front 
and  brick  work  by  stay  bolts,  but  the  witnesses  were  not  able  to 
say  whether  that  was  done  in  this  case.  The  boilers  could  not  be 
removed  without  taking  down  the  brick  work  around  them  and 
a  part  of  the  building  to  make  room  for  them  to  be  taken  out.  To 
take  the  boilers  out  through  the  mill  would  not  require  the  walls 
of  the  building  to  be  taken  down,  but  they  could  be  taken  out  by 
removing  a  part  of  the  wood  work  in  front,  or  by  making  a  hole 
in  the  lean-to  or  engine  house,  at  the  rear  end  of  the  boilers. 

The  engines  were  placed  on  wooden  foundations  and  fastened 
to  them  with  bolts.  The  large  engine  was  in  the  brick  building 
with  the  boilers,  the  other  inside  the  main  building.  They  were 
connected  with  the  boilers  by  steam  pipes.  The  main  shaft  was 
connected  with  the  large  engine  by  a  connecting  rod  fastened  with 
keys.  The  drum  and  balance  wheel  were  placed  on  the  main  shaft 
and  run  with  it.  The  gearing  for  the  upright  saw  was  connected 
by  a  belt  running  on  the  drum.  The  other  saw  connected  directly 
with  the  shaft  without  any  belt.  The  engines  could  be  taken  out; 
but  there  was  no  opening  large  enough  to  take  out  the  fly  wheel; 
and  perhaps  the  drum  would  be  too  large  for  the  doors. 

The  mill  was  completed  in  the  fall  of  1857,  and  was  after  that 
time  occupied  by  Farley  &  Ketcham  as  a  saw-mill,  the  motive 
power  being  furnished  by  the  engine  and  boilers.  The  building 
was  designed  for  a  saw-mill,  and  in  its  form  and  structure  was 
adapted  to  the  business  of  such  a  mill;  and,  as  appears  from  a 
description  of  the  building  contained  in  the  record,  it  would,  with- 
out material  alterations  and  additions,  be  comparatively  of  little 
value  for  any  other  purpose. 

There  was  no  water  power  connected  with  the  mill,  and  it  de- 
pended wholly  on  steam  for  its  power. 

On  the  14th  of  January,  1859,  Farley  &  Ketcham  executed  to 
the  defendants  a  mortgage  upon  the  real  estate  on  which  the  mill 
was  located  and  all  its  appurtenances,  to  secure  an  indebtedness 
owing  by  them  to  the  defendants.  The  mortgage  was  duly  re- 
corded in  the  record  of  mortgages  of  Lucas  County.  This  indebted- 
ness was  unpaid  at  the  time  of  the  commencement  of  this  action, 
and  the  defendants  were  in  the  possession  of  the  mill.     The  plain- 


336  COMMON   LAW   RELATIONS 

tiffs  demanded  possession  of  the  property,  but  the  defendants  re- 
fused to  permit  them  to  take  it  away. 

The  plaintiffs  claim  that,  at  the  time  of  receiving  their  mort- 
gage, the  defendants  had  notice  of  the  mortgage  to  the  plaintiffs. 
This  is  denied  by  the  defendants.  On  the  trial  the  Court  of  Com- 
mon Pleas  found  this  issue  in  favor  of  the  defendants. 

Upon  this  state  of  facts  and  finding,  the  Court  of  Common  Pleas 
gave  judgment  for  the  defendants. 

To  reverse  this  judgment  a  petition  in  error  was  filed  by  the 
plaintiffs  in  the  district  court,  where  the  judgment  was  affirmed, 
and  the  plaintiffs  now  seek  in  this  proceeding  to  reverse  this  action 
of  the  district  court. 

White,  J.  I.  The  plaintiffs  seek  to  recover  for  a  tort  arising 
from  the  conversion  of  the  property  in  controversy;  and,  in  order 
to  establish  their  title  to  such  property,  as  against  the  defendants, 
Whitaker  and  PhilUps,  rely  upon  the  chattel  mortgage.  In  order 
to  ascertain  the  relation  in  which  Whitaker  and  PhiHips  stand  to 
this  mortgage,  it  is  proper,  in  the  first  place,  to  determine  whether 
they  had  notice  of  its  existence  at  the  time  they  received  their 
real  estate  mortgage.  The  issue,  upon  this  question  of  notice,  has 
been  twice  found  in  favor  of  the  defendants,  by  the  Court  of  Com- 
mon Pleas,  and  this  finding  we  are  now  asked  to  review,  on  the 
ground  that  it  is  against  the  evidence.  On  this  point,  we  only  deem 
it  necessary  to  state  that  the  testimony  in  the  court  below  was  con- 
flicting; and  while,  as  original  triers  of  fact,  we  would  have  been 
inclined  to  find  differently,  yet  we  cannot  say  that  the  finding  is 
so  manifestly  wrong  as  to  warrant  this  court  in  reversing  the  judg- 
ment on  this  ground. 

II.  The  next  question  is  whether,  as  between  Farley  &  Ketcham, 
the  mortgagors,  and  Whitaker  and  PhilHps,  the  mortgagees,  in 
the  real  estate  mortgage,  the  property  in  controversy  became  a  part 
of  the  freehold?  We  are  of  opinion  that  it  did.  A  discussion  of 
the  general  principles  to  be  regarded  in  determining  when  addi- 
tions of  personal  property  become  a  part  of  the  realty,  is  here 
deemed  unnecessary.  The  only  difficulty  arises  in  the  application 
of  these  principles  to  the  solution  of  particular  controversies  as 
they  arise;  and  whether  an  article  has  been  annexed  to  the  realty 
so  as  to  become  a  permanent  accession  to  it,  must,  in  a  great  degree, 
be  determined  by  the  circumstances  of  each  particular  case. 

Farley  &  Ketcham,  who  made  the  annexations  in  the  present 
case,  were  the  owners  of  the  fee;  and  the  question  we  are  now 


BRENNAN    V.    WHITAKER  337 

considering  arises  between  them,  as  mortgagors,  and  their  mort- 
gagees, Whitaker  and  Phillips,  who,  for  the  purposes  of  their 
security,  are  to  be  regarded  as  purchasers. 

The  building  was  erected  for  a  saw-mill,  and  in  the  form  and 
nature  of  its  structure  was  adapted  to  the  business  of  a  mill  of  that 
desci-iption.  The  boilei-s  and  engines  were  the  only  motive  power, 
and  were  designed  so  to  be  when  the  mill  was  built.  They  per- 
formed the  office  of  a  wheel  and  water-power,  and  their  adaptation 
to  the  structure  and  the  uses  for  which  it  was  designed,  as  well  as 
the  mode  of  their  annexation,  show  that  they  were  intended  to  be 
permanent.  They  could  not  be  removed  without  leaving  the  saw- 
mill incomplete.  The  building  itself  for  an}'  other  purpose  would, 
without  material  alterations  and  additions,  be  comparatively  of 
little  value.  The  shafting,  drum,  balance  wheel,  gearing  for  the 
upright  saw,  and  the  muley  saw  and  gearing,  though  differing 
from  the  boilers  and  engines  in  the  mode  of  annexation,  yet  are 
to  be  regarded  as  fixtures. 

The  mode  of  annexation  alone  does  not  determine  the  character 
of  the  property  annexed;  but  the  appropriateness  of  the  articles 
named  to  the  mill,  and  their  necessity  to  its  completeness,  are  also 
to  be  looked  to. 

III.  The  remaining  question  is,  whether  the  chattel  mortgage 
to  the  plaintiffs,  as  against  the  real  estate  mortgagees,  deprives 
the  property  in  controversy  of  the  character  of  fixtures?  The 
plaintiffs  claim  that  this  is  the  effect  of  the  chattel  mortgage;  and 
that  they  have  the  same  right  to  recover  the  property  from  the 
mortgagees  (Whitaker  and  Phillips),  without  notice,  as  they  would 
have  had  against  Farley  &  Ketcham,  if  the  real  estate  mortgage 
had  not  been  given. 

It  is  not  necessary  to  inquire  what,  as  against  mortgagees  with- 
out notice,  would  have  been  the  rights  of  a  party,  other  than  the 
owner  of  the  freehold,  who  might  have  placed  in  the  same  manner 
upon  the  premises  the  property  in  question,  under  some  agreement 
with  the  owner,  for  a  temporary  purpose,  and  with  the  right  of 
lemoval;  nor  as  to  what  would  have  been  the  effect  if  the  property 
had  been  annexed  by  the  tortious  act  of  Farley  &  Ketcham.  The 
facts  in  this  case  raise  neither  of  these  questions,  and  we  forbear 
entering  into  an  examination  of  the  authorities  cited  bearing  upon 
them.  Here  it  was  not  only  the  intention  of  Farley  &  Ketcham  to 
annex  the  property  to,  and  make  it  a  part  of,  the  freehold,  but  their 
so  doing  was  according  to  the  understanding  of  the  parties  when  the 
mortgage  to  the  plaintiffs  was  executed.    In  the  mortgage  it  said 


338  COMMON    LAW    RELATIONS 

the  boilers  are  "designed  to  be  used  in  their  (F.  &  K.'s)  saw-mill," 
and  power  is  given  the  plaintiffs,  on  default  of  payment,  "to  take 
possession  thereof  (mortgaged  property)  whether  the  same  shall 
be  attached  to  the  freehold  and  in  law  become  a  part  of  the  realty 
or  not."  The  right  given  to  the  plaintiffs  by  the  mortgage  to  enter 
upon  the  premises  and  sever  the  property  would,  doubtless^  TTEve 
Tieeri  effectiiaTirs  between  the  parties.  But  the  defendants  were 
purchasers  without  notice  of  this  agreement.  The  filing^  chattel 
J^l^^'^fL^f^^"  i"  Tinid'^  pnngf.riinh'vp  nntticR_rm1y  of  incumbrances  upon 
goods  and  chattels.  The  defendants  purchased  and  took  a  convey- 
ance of  reaL  estate  of  which  the  property  now  in  question  was,  in 
law,  a  part:  and,  in  our  opinion,  it  devolved  upon  the  plaintiffs 
who  sought  to  change  tlic  IcgaTcharacteTof  tlii;  property  and  create 
incumbrances  upon  it,  either  to  pursue  the  mode  prescribed  by  law 
Tor' incumbering  the  kind  of  estate  to  which  it  appeared  to  the- 
world  to  belong,  and  for  giving  notice  of  such  incumbrance,  or, 
otherwise,  take  the  risk-otits  loss  in  case  it  should  be  sold  and 
conveyed  as  part  of  the  real  estate  to  a  purchaser  without  notice. 
ft  is  true  that  in  the  case  of  Ford  v.  Cobb,  20  N.  Y.  Rep.  344,  it 
was  held  that  an  agreement  which  was  evidenced  by  a  chattel  mort- 
gage was  effectual  against  a  subsequent  purchaser  of  the  land, 
without  notice.  But  it  seems  to  us  to  be  sounder  rule,  and  more 
in  accordance  with  principle,  and  the  policy  of  our  recording  laws, 
to  require  actual  severance,  or  notice  of  a  binding  agreement  to 
sever,  to  deprive  the  purchaser  of  the  right  to  fixtures  or  appur- 
tenances to  the  freehold  {Fortman  v.  Goepper,  14  Ohio  St.  Rep. 
565;  2  Smith's  L.  C.  259;  Fryatt  v.  Sullivan  Co.,  5  Hill,  116;  Rich- 
ardson V.  Copeland,  6  Gray,  536;  Frankland  et  al.  v.  Moulton  et  al., 
5  Wisconsin  Rep.  1). 

In  the  case  last  named,  the  owner  of  a  steam  engine  sold  and 
assisted  to  annex  the  same  to  the  realty,  reserving  a  chattel  mort- 
gage on  the  same  for  a  part  of  the  purchase  money;  and  it  was 
held  that  the  chattel  mortgage  was  inoperative  as  against  a  prior 
mortgagee  of  the  real  estate.  The  mode  of  annexation  was  very 
similar  to  that  existing  in  the  case  under  consideration;  and  the 
holding  that  the  chattel  mortgage  was  inoperative  as  against  a 
prior  mortgagee  of  the  real  estate,  as  was  likewise  done  in  Copeland 
V.  Richardson,  supra,  restricts  the  operation  of  agreements  to  sever 
what  would  otherwise  be  regarded  as  fixtures,  more  than  is  required 
to  be  done  for  the  decision  we  make  in  the  present  case.  Whether 
the  restriction  upon  the  right  of  removal  that  was  applied  in  these 
cases  can  be  properly  applied  in  favor  of  a  mortgagee  of  the  real 


DAVENPORT   V.    SHANTS  339 

estate  claiming  the  property  added  to  the  premises  aftgr  his  mort- 
gage as  fixtures,  and  against  a  party  claiming  the  same  property  as 
personal  chattels  under  a  chattel  mortgage  from  the  owner,  when 
the  removal  would  leave  the  realty  claimed  by  the  mortgagee  as 
a  security  in  as  good  plight  as  when  his  mortgage  was  taken,  it  is 
unnecessary  now  to  inquire;  and  upon  this  question  we  express  no 
opinion. 

The  judgment  of  the  district  court  will  be  affirmed} 
Brinkerhoff,  C.  J.,  and  Scott,  Day,  and  Welch,  JJ,,  con- 
curred. 


DAVENPORT  v.  SHANTS 

Supreme  Court  of  Vermont,  1871 

(43  Vt.  546) 

Petition  for  foreclosure  of  a  mortgage.  The  petition  sets  forth 
a  rnortgage',  executed  Dy  Jonn  u.  snants  &  Co.,  to  the  petitioner, 
October  13,  1866,  of  a  mill  and  factory  and  tannery  in  Searsburg, 
with  200  acres  of  land,  and  three  dwelhng-houses  thereon.  "And 
also  the  factory,  then  in  process  of  erection  on  the  site  of  said 
Searsburg  tannery,  with  the  saw-mill,  water-wheels,  and  all  the 
machinery  and  shafting  in  said  factory,"  to  secure  a  note  of  $1000. 
The  petition  then  sets  forth  the  execution  by  Shants  &  Co.,  and 
the  purchase  by  the  petitioner,  of  another  mortgage  on  the  same 
premises,  except  the  machinery,  and  ajso  sets  forth  that  the  defend- 
ants, other  than  Shants  &  Co.,  claim  an  interest  in  said  property. 

The  petition  was  taken  as  confessed  by  all  the  defendants,  except 
Henry  G.  Root,  who  appeared  and  answered,  admitting  the  facts 
set  forth  in  the  petition,  or  not  denying  them,  except  as  follows: 

That  between  the  3d  day  of  August  and  the  27th  day  of  October, 
1866,  this  defendant,  by  his  agent,  Olin  Scott,  sold  to  the  said 
John  G.  Shants  &  Co.  various  articles  of  machinery,  consisting 
of  a  circular  saw-mill  and  saw,  and  the  belts  to  drive  the  same; 
the  gears  on  two  water-wheels;  the  upper  piece  of  a  large  water- 
wheel  shaft  and  box  to  the  same;  the  counter-shafts  to  two  water- 
wheels;  the  drum  flanges  and  boxes  to  the  said  counter-shafts; 
and  one  extra  saw  collar;  upon  the  condition  that  said  machinery 
should  be  and  remain  the  property  of  this  defendant  until  the  same 

1  But  see  Ford  v.  Cobb,  20  N.  Y.  344  (1887),  and  Crippen  v.  Morrison,  13 
(1859);  Sword  v.  Low,  122  111.  487       Mich.  23  (1864),  contra. 


340  COMMON    LAW   RELATIONS 

should  be  paid  for  by  said  John  G.  Shants  &  Co.;  the  whole  of  said 
machinery  amounting  in  value  to  the  sum  of  S919.86,  which  they 
agreed  to  pay  this  defendant  for  the  same.  All  of  which  machinery, 
excepting  the  gears  and  upper  shaft  to  the  large  water-wheel,  and 
the  counter-shaft  and  boxes  to  the  same,  were  in  place  in  the  factory 
mentioned  in  said  petition  at  the  time  of  the  alleged  execution  of 
the  mortgages  set  forth  in  said  petition,  and  the  said  excepted 
articles  have  since  said  time  been  placed  in  said  factory.  That 
there  has  been  paid  to  this  defendant  towards  the  purchase  of 
said  machinery  the  sum  of  $191  only,  the  remainder  being  still 
due  with  the  interest  thereon. 

And  this  defendant  claims  and  insists  that  his  title  to  said 
machinery  is  paramount  to  that  of  the  said  John  G.  Shants  &  Co., 
and  to  that  of  the  petitioner,  and  that  the  petitioner  has  no  right 
to  a  foreclosure  as  to  said  machinery  or  any  part  thereof  against 
the  defendant. 

The  petitioner  replied,  saying  that  he  never  at  any  time,  until 
long  after  the  execution  of  the  several  mortgages  sought  to  be 
foreclosed  by  this  petition,  had  any  knowledge  or  notice,  actual  or 
constructive,  of  any  contract  or  understanding  between  the  defend- 
ant and  the  said  John  G.  Shants  &  Co.,  by  which  the  defendant 
had  or  claimed  to  have  any  right  or  claim  to  the  saw-mill,  water- 
wheels,  and  the  machinery  and  shafting  in  the  factory  described 
in  said  mortgage;  that  he  did,  on  the  13th  day  of  October,  1866,  in 
good  faith,  and  relying  upon  the  fact  no  that  claims,  liens  or  in- 
cumbrances existed  of  record  upon  any  of  the  property  or  estate 
described  in  said  mortgage,  and  upon  the  promise  and  assurance 
of  both  the  members  of  said  firm  of  John  G.  Shants  &  Co.  that 
none  existed  in  fact,  loan  to  said  firm  the  full  sum  of  one  thousand 
dollars,  and  took  said  mortgage  in  good  faith  to  secure  the  payment 
thereof;  that  if  it  is  true  that  the  defendant  did  reserve  such  a  lien 
upon  the  several  articles  named  in  his  answer  to  said  petition  for 
foreclosure,  as  is  in  said  answer  stated,  yet  it  is  also  true  that  the 
defendant  well  knew  the  purpose  for  wliich  John  G.  Shants  &  Co. 
purchased  the  same,  and  the  defendant  then  and  afterwards  con- 
sented that  they  might  attach  and  annex  said  water-wheels,  saw- 
mill, shafting  and  machinery  to  their  freehold,  and  make  the  same 
a  part  of  and  appurtenant  to  said  freehold,  and  did  by  his  agents 
and  workmen  assist  the  said  John  G.  Shants  &  Co.  in  so  doing; 
and  insists  that  the  lien  created  by  his  said  mortgage  is  paramount 
to  any  lien  or  claim  of  the  defendant  to  the  saw-mill,  water-wheels, 
machinery  and  shafting  in  said  factory. 


DAVENPORT   V.    SHANTS  341 

Stipulation. — It  is  hereby  stipulated  that  this  cause  shall  stand 
for  hearing  upon  petition,  answer,  replication,  affidavits  of  Olin 
Scott  and  H.  W.  Scott,  statement  of  facts,  and  notes  and  mort- 
gages set  forth  in  the  petition.  The  facts  stated  in  the  answer  are 
admitted  to  be  true,  excepting  as  varied  or  qualified  by  the  reph- 
cation  in  connection  with  the  affidavits  and  statement  of  facts. 
The  facts  stated  in  the  rephcation  are  admitted  to  be  true,  except- 
ing as  varied  or  quaUfied  by  the  affidavits  and  statement  of  facts, 
and  excepting  that  the  averment  respecting  annexing  "to  the  free- 
hold of  the  said  John  G.  Shants  &  Co.,  and  make  the  same  a  part 
of,  and  appurtenant  to  said  freehold,"  is  not  to  be  taken  as  an  aver- 
ment of  facts,  but  as  a  conclusion  of  law.  The  facts  stated  in  the 
affidavits  and  statement  are  admitted  to  be  true.^ 

At  the  September  term,  1868,  decree;  pro  forma,  foreclosing 
mortgage  against  all  defendants,  except  Henry  G.  Root,  and  dis- 
missing the  petition  as  to  Root,  with  costs.    Appeal  by  petitioner. 

Peck,  J.  The  bill  having  been  taken  as  confessed  as  to  all  the 
defendants,  except  Henry  G.  Root,  and  he  alone  defending,  the 
only  question  is  as  to  the  right  of  the  orator,  under  his  mortgage 
from  Shants  &  Co.,  to  that  portion  of  the  property  sold  condition- 
ally by  Root  to  "the  said  mortgagors. 

The  bill,  and  answer  of  Root,  in  connection  with  the  written 
stipulation  of  the  parties  on  file,  leave  no  dispute  as  to  the  material 
facts  in  the  case,  and  no  time  need  be  spent  in  repeating  the  facts 
thus  agreed. 

It  must  be  regarded  as  settled  as  a  general  rule  in  this  State  that 
a  party  may  sell  and  deliver  personal  property  under  a  condition 
that  it  shall  remain  the  property  of  the  vendor  until  the  price  is 
paid;  and  that  under  such  contract  the  title  will  remain  in  the 
vendor  until  the  condition  is  complied  with,  both  as  between  the 
vendor  and  such  conditional  vendee,  and  also  as  between  the  origi- 
nal vendor  and  a  bona  fide  purchaser  without  notice  from  such 
conditional  vendee.  The  only  question  is  whether  the  facts  of  this 
case  take  it  out  of  the  general  rule. 

1  The  affidavits  and  formal  state-  33  x  90  feet,  by  John  G.  Shants  & 

ment,  dealing  with  the  mode  of  an-  Co.,  for  the  purpose  of  prosecuting 

Tiexation  of  the  fixtures,  are  omitted.  the  business  of  manufacturing  lum- 

The  statement  concludes  that  "all  ber,    chair  stock,    etc.,   and   is   con- 

the    machinery    mentioned     above,  nected    with    and    attached    to    the 

including  the  water-wheels  and  ap-  building,  as  machinery  of  that  char- 

pendages,  were  placed  in  the  factory,  acter  usually  is." 
which  is  a  large  two-story  building, 


342  COMMON    LAW   RELATIONS 

The  proposition  of  the  counsel  of  the  defendant  Root  is,  that  the 
whole  property  sold  conditionally  by  Root  to  Shants  &  Co.  was 
personal  property  as  well  after  as  before  the  sale,  and  cannot 
properly  be  claimed  as  fixtures  or  as  parts  of  the  realty.  But  we 
think  as  between  mortgagor  and  mortgagee,  if  the  title  of  the  mort- 
gagor were  absolute,  the  defendant's  proposition  is  not  correct; 
and  that  under  the  recent  decisions  in  this  State,  on  being  put  in 
place  in  the  mill  and  factory,  as  shown  in  this  case,  it  became  so  far 
annexed  to  the  realty  as  to  pass  under  a  mortgage  of  the  real  estate. 
But  still  the  question  remains  as  between  the  mortgagee  under  his 
mortgage,  and  the  original  owner  under  his  conditional  sale  to  the 
mortgagor,  which  has  the  paramount  right. 

First,  as  to  that  portion  of  the  property  which  had  been  put  in 
place  in  the  mill  and  factory  by  the  mortgagors  after  they  thus 
purchased  it  of  Root,  and  which  was  in  the  building  and  thus 
annexed  at  the  time  the  orator  took  his  mortgage:  As  to  this  prop- 
erty, the  orator,  as  it  appears,  having  advanced  his  money  and 
taken  his  mortgage  in  good  faith,  without  notice  of  any  lien  or 
incumbrance  upon  it,  and  from  its  condition  having  reason  to 
suppose  that  the  mortgagors'  title  to  this  property  in  question  was 
the  same  as  his  title  to  the  realty  to  which  it  was  annexed,  and  of 
which  it  was  apparently  parcel,  seems  to  have  a  strong  equity  in 
his  favor.  While,  on  the  other  hand,  the  defendant  Root,  the 
unpaid  vendor,  who  endeavored  to  secure  himself  by  stipulation  in 
the  sale  that  he  should  hold  the  title  till  paid,  ought  not  to  be 
deprived  of  this  security  without  some  substantial  reason.  But  the 
defendant  Root  must  have  understood  when  he  sold  the  property 
to  Shants  <fe  Co.  that  they  intended  to  put  the  property  to  use  in 
advance  of  the  payment  of  the  price;  and  from  the  kind  and  nature 
of  the  property  he  must  have  expected  that  in  its  use  it  necessarily 
must  be  annexed  to  the  realty  substantially  in  the  manner  in  which 
it  was,  and  thereby  become  apparently  parcel  of  the  realty.  What 
he  knew  or  had  reason  to  suppose  and  did  suppose  was  to  be  done 
with  the  property  he  must  be  taken  to  have  consented  to,  as  he  did 
not  object.  Root,  therefore,  having,  by  implication  at  least,  if  not 
expressly,  consented  that  the  property  might  be  incorporated  with 
the  realty  of  Shants  &  Co.  in  the  manner  it  was,  and  they  thereby 
become  clothed  with  the  apparent  title  as  incident  to  their  record 
title  to  the  real  estate,  whereby  the  mortgagee  was  misled  and  in- 
duced to  part  with  his  money  on  the  credit  of  the  property,  the 
equity  of  the  mortgagee  is  paramount  to  that  of  the  conditional 
vendor.    Justice  and  equity,  as  well  as  sound  policy,  require  this 


TIFFT  V.   HORTON  343 

limit  to  the  rights  of  a  conditional  vendor  as  between  him  and  an 
innocent  purchaser  or  mortgagee  of  real  estate  without  notice  who 
advances  his  money  on  the  faith  of  a  perfect  title» 

But  as  to  that  portion  of  the  property  mentioned  in  the  answer 
of  the  defendant  Root  and  in  the  agreed  statement  of  facts  on 
file,  which  had  not  been  placed  in  the  mill  or  factory  at  the  time 
of  the  execution  of  the  mortgage  to  the  orator,  but  was  in  the  yard 
and  put  in  place  in  the  factory  or  mill  afterwards,  the  right  of  the 
defendant  Root  is  paramount  to  the  right  of  the  orator.  That,  not 
having  been  annexed  to  the  realty  at  the  date  of  the  mortgage, 
would  not  pass  as  incident  to  the  realty;  and  the  mortgage  did  not 
divest  Root  of  his  title.  It  having  been  placed  in  the  building  by 
the  mortgagors  after  the  execution  of  the  mortgage,  the  mortgagee 
might  hold  it  as  against  them,  but  not  as  against  Root,  the  condi- 
tional vendor.  As  to  this  portion  of  the  property  the  mortgagee 
was  not  misled,  and  advanced  nothing  on  the  faith  of  it. 

The  decree  of  the  Court  of  Chancery  is  reversed,  and  cause  re- 
manded for  a  decree  of  foreclosure  for  orator  against  all  the  de- 
fendants as  to  all  the  property,  except  that  defendant  Root  have 
a  right  to  that  portion  of  the  property,  or  the  value  thereof,  not  in 
place  in  the  factory  or  mill  at  the  time  of  the  execution  of  the  mort- 
gage to  the  orator,  but  put  in  afterwards,  the  orator  having  his 
"election  to  pay  to  Root  the  value  of  it,  or  have  it  excepted  in  the 
decree  so  far  as  Root  is  concerned,  with  liberty  to  Root  to  remove 
it  within  such  reasonable  time  as  the  Court  of  Chancery  shall  fix 
for  that  purpose.^ 


TIFFT  V.   HORTON 
Court  of  Appeals  of  New^  York,  1873 

(53  N.  Y.  377) 

Appeal  from  judgment  of  the  General  Term  of  the  Superior 
Court  of  Buffalo,  affirming  a  judgment  in  favor  of  the  plaintiffs, 
entered  upon  the  verdict  of  a  jury. 

This  action  was  brought  to  recover  damages  for  the  alleged 
conversion  of  a  boiler  and  engine. 

1  Buzzell  V.  Cummings,  61  Vt.  213  Johnson,   37   Mich.   47    (1877),   and 

(1888);  Haven  v.  Emery,  33  N.  H.  66  Lansing  Iron   Works  v.   Walker,   91 

(1856);  TFictev.  i/i«,  115  Mich.  333  Mich.  409  (1892).     Cf.  Campbell  v. 

(1897),  accord.    And  see  KnowUon  v.  Roddy,  44  N.  J.  Eq.  244  (1888). 


\ 


344  COMMON  LAW  RELATIONS 

The  plaintiffs,  under  a  written  contract,  manufactured  the 
engine  and  boiler  in  question,  with  other  machinery,  for  Mrs. 
Jane  Coombs  Brown,  to  be  put  up  and  used  in  a  new  elevator 
which  Mrs.  Brown  was  building,  in  the  city  of  Buffalo.  By  the 
terms  of  the  contract,  Mrs.  Brown  was  to  give  for  a  portion  of  the 
purchase-price  of  the  boiler,  engine  and  other  machinery  her  two 
promissory  notes,  to  be  secured  by  a  mortgage  on  the  boiler  and 
engine.  The  notes  and  mortgages  were  to  be  executed  and  de- 
livered so  soon  as  the  engine  and  boiler  were  complete  in  the  plain- 
tiffs' shop,  ready  to  be  put  up  at  the  elevator.  The  boiler  and  engine 
and  other  machinery  were  completed  according  to  the  contract; 
and  while  in  the  plaintiffs'  shop  the  mortgage  was  given  as  provided 
in  the  contract.  It  was  provided  in  the  mortgage  that  the  engine 
and  boiler  should  beancTTw^iain  personal  property  until  the  notes 
mentioned  in  it  were  fully  paid,  notwithstanding  the  manner  in 
which  they  should  be  placed  in  the  elevator.  The  mortgage  re- 
cited the  fact  that  the  engine  and  boiler  were  made  to  be  put  up  in 
the  elevator  of  Mrs.  Brown,  pursuant  to  the  agreement  above  men- 
tioned, and  authorized  the  plaintiffs,  in  case  of  a  breach  of  its 
condition,  to  enter  the  elevator  and  take  and  carry  the  boiler  and 
engine  away.  Mrs.  Brown  failed  to  pay  the  second  note  secured 
b^jthe^mortgage.  The  boiler  and  engine  were  not  put  in  the 
elevator  building,  but  on  a  foundation  made  for  them  outside  of 
the  building;  and  a  building  called  the  engine-house  was  built 
over  them  after  they  were  set  up.  After  the  mortgagor  failed  to 
pay  the  note,  plaintiffs  went  to  take  the  T^oiler  and  engine,  and, 
"Ending  the  defendants  in  possession,  demanded  them.  The  de- 
fendants claimed  to  own  them,  and  refused  to  let  The  plaintiffs 
have  them.  The  defendants  claimed  title  to  the  engine  and  boiler 
through  three  real  estate  mortgages,  executed  by  Mrs.  Brown  before 
the  boiler  and  engine  were  set  up  on  the  premises.  These  mort- 
gages had  been  foreclosed,  and  the  premises  sold  under  judgments 
obtained  in  the  foreclosure  actions,  and  the  premises  bid  off  by  and 
conveyed  to  the  defendants.  The  rights  of  the  parties,  by  stipula- 
Ition  before  sale,  were  not  to  be  affected  by  the  sales  on  the  judg- 
Iments  in  the  foreclosure  actions.  The  defendants  asked  the  court 
I  to  decide,  as  matter  of  law,  that  there  was  not  any  evidence  of 
a  conversion  by  the  defendants  of  the  boiler  and  engine.  This  the 
court  declined  to  do.  The  defendants  requested  the  court  to  decide 
that  the  boiler  and  engine  were  a  part  of  the  realty,  as  between  the 
parties  to  this  action,  notwithstanding  the  written  agreement.  The 
court  refused  so  to  decide.    The  jury  rendered  a  verdict  in  favor 


TIFFT   V.    HORTON  345 

rf  the  plaintiffs  for  the  sum  of  $5,141.88,  and  judgment  was  en- 
tered thereon. 

FoLGER,  J.  It  is  well  settled  that  chattels  may  be  annexed  to  the 
j^eal  estate  and  still  retain  their  charantpr  as^  pprsona]  prnpprtv.  See 
Voorhees  v.  McGinnis,  48  N.  Y.  278,  and  cases  there  cited.  Of 
the  various  circumstances  which  may  determine  whether  in  any 
case  this  character  is  or  is  not  retained,  the  intention  with  which 
they  are  annexed  is  one;  and  if  the  intention  is  that  they  shall  not 
by  annexation  become  a  part  of  the  freehold,  as  a  general  rule 
they  will  not.  The  limitation  to  this  is  where  the  subject  or  mode 
of  annexation  is  such  as  that  the  attributes  of  personal  property 
cannot  be  predicated  of  the  thing  in  controversy  (Ford  v.  Cobb, 
20  N.  Y.  344),  as  where  the  property  could  not  be  removed  without 
practically  destroying  it,  or  where  it  or  part  of  it  is  essential  to  the 
support  of  that  to  which  it  is  attached  (id.). 

It  may  in  this  case  be  conceded  that  if  there  were  no  fact  in  it 
but  the  placing  upon  the  premises  of  the  engine  and  boilers  in  the 
manner  in  which  they  were  attached  thereto,  they  would  have 
become  fixtures,  and  would  pass  as  a  part  of  the  realty.  But  the 
agreement  of  the  then  owner  of  the  land  and  the  plaintiff  is  express, 
that  they  should  be  and  remain  personal  property  until  the  notes 
given  therefor  were  paid;  and  by  the  same  agreement  power  was 
given  to  the  plaintiffs  to  enter  upon  the  premises  in  certain  con- 
tingencies and  to  take  and  carry  them  away.  While  there  is  no 
doubt  but  that  the  intention  of  the  owner  of  the  land  was  that  the 
engine  and  boilers  should  ultimately  become  a  part  of  the  realty 
and  be  permanently  affixed  to  it,  this  was  subordinate  to  the  prior 
intention  expressed  by  the  agreement.  That  fully  shows  her  in- 
tention and  the  intention  of  the  plaintiffs  that  the  act  of  annexing 
them  to  the  freehold  should  not  change  or  take  away  the  character 
of  them  as  chattels  until  the  price  of  them  had  been  fully  paid. 
And  as  parties  may  by  their  agreement,  expressing  their  intention 
so  to  do,  preserve  and  continue  the  character  of  the  chattels  as 
personal  property,  there  can  be  no  doubt  but  that  as  between  them- 
selves the  agreement  in  this  case  was  fully  sufficient  to  that  end. 

But  it  is  contended  that  where  in  the  solution  of  this  question 
the  intention  is  a  criterion,  it  must  be  the  intention  of  all  those  who 
are  interested  in  the  lands;  and  that  here  the  defendants,  prior 
mortgagees  of  the  real  estate,  were  interested,  and  have  not  ex- 
pressed nor  shown  such  intention.  Tt  jt^  not  {n  be  denied  that,  as— 
a  general  rulg^jjll  fixtures  put  upon  the  land  by  the  owner  thereof, 


346  COMMON    LAW   RELATIONS 

whether  before  or  after  the  execution  of  a  mortgage  upon  it,  be- 
come  subjectjo  the  lien^thereof.  Yet  I  do  n"ot  think  that  the 
prior  mortgagee  of  the  realty  can  interpose  before  foreclosure  and 
sale  to  prevent  the  carrying  out  of  such  an  agreement  as  that  in 

I  this  case.  Had  the  mortgagees  taken  their  mortgage  upon  the 
lands  after  the  boilers  and  engine  had  been  placed  thereon  under 
this  agreement,  they  would  have  had  no  right  to  prevent  the 
removal  of  them  by  the  plaintiffs  on  the  happening  of  the  contin- 
gencies contemplated  by  it.  The  rights  of  a  subsequent  mortgagee 
are  no  greater  than  those  of  a  subsequent  grantee;  and  he,  it  is 
held,  cannot  claim  the  chattels  thus  annexed,  and  must  seek  his 
remedy  for  their  removal  by  virtue  of  such  an  agreement  upon 
the  covenants  in  his  conveyance  of  the  lands  (Mott  v.  Palmer, 
1  N.  Y.  564;  and  see  Ford  v.  Cobb,  supra). 

A  prior  mortgagee  who  certainly  has  not  been  induced  to  enter 
into  his  relation  to  the  lands  by  the  presence  thereon  of  the  chattels 
in  dispute  subsequently  annexed  thereto  has  no  greater  right  than 
a  subsequent  mortgagee.  Neither  could  claim  as  subject  to  the 
lien  of  his  mortgage  personal  property  brought  on  to  the  premises 
with  permission  of  the  owner  of  the  lands  and  not  at  all  affixed 
thereto.  Nor  can  either  claim  personal  property  as  so  subject  from 
the  mere  fact  of  the  affixing,  where  by  the  express  agreement  of 
the  owner  of  the  fee  and  the  owner  of  the  chattel  its  character  as 
personal  property  was  not  to  be  changed,  but  was  to  continue,  and 
is  to  be  subject  to  a  right  of  removal  by  the  owner  of  the  chattel 
on  failure  of  performance  of  conditions.  The  language  of  the  au- 
thorities is  that  the  chattel  in  such  case  is  personal  property,  for 
which  an  action  of  trover  for  the  conversion  of  it  may  be  main- 
tained (Sjnith  V.  Benson,  1  Hill,  176;  Mott  v.  Palmer,  supra;  Farrar 
V.  Chauffetete,  5  Den.  527;  Ford  v.  Cobb,  supra). 

Another  consideration  makes  it  clear,  I  think,  that  in  this  case 
the  absence  of  a  concurrent  intention  on  the  part  of  the  prior 
mortgagees  is  of  no  weight.  As  above  stated,  as  a  general  rule,  all 
fixtures  put  upon  lands  by  the  owner  thereof  become  a  part  thereof 
and  subject  to  the  lien  of  a  prior  mortgage;  but  sometimes  it  is 
doubtful  if  they  have  been  so  annexed  as  to  so  become.  And  then, 
it  is  said,  the  question  may  be  decided  by  the  presumed  intent  of 
the  party  making  the  annexation  of  the  chattels  {Winslow  v.  Mer. 
Ins.  Co.,  4  Mete.  306).  The  law  makes  a  presumption  in  the  case  of 
any  one  making  such  annexation,  and  it  is  different  as  the  interest 
of  the  person  in  the  land  is  different,  that  is,  whether  it  is  tem- 
porary or  permanent.    The  law  presumes  that  because  the  interest 


TIFFT   V.    HORTON  347 

of  a  tenant  in  the  land  is  temporary,  that  he  affixes  for  himself 
with  a  view  to  his  own  enjoyment  during  his  term,  and  not  to 
enhance  the  value  of  the  estate;  hence,  it  permits  annexations  made 
by  him  to  be  detached  during  his  term,  if  done  without  injury  to 
the  freehold  and  in  agreement  with  known  usages.    The  law  pre- 
sumes that  because  the  interest  of  the  vendor  of  real  estate  who  is 
the  owner  of  it  has  been  permanent,  that  he  has  made  annexations 
for  himself,  to  be  sure,  but  with  a  view  to  a  lasting  enjoyment  of 
his  estate  and  for  its  continued  enhancement  in  value.     So  the 
mortgagor  of  land  is  the  owner  of  it,  and  has  a  permanent  interest 
therein,  and  the  law  presumes  that  improvements  which  he  makes 
thereon  by  the  annexation  of  chattels  he  makes  for  himself  for 
prolonged  enjoyment  and  to  enhance  permanently  the  value  of  his 
estate  (Winsloiv  v.  Mer.  Ins.  Co.,  supra).    These  are  presumptions 
of  the  intention  of  the  tenant  alone,  the  vendor  alone,  and  of  the 
mortgagor  alone;  nor  are  they  ordinarily  concerned  at  all  with 
the  relation  to  the  lands,  or  with  the  purpose  of  the  landlord  or  the 
vendee  or  the  mortgagee;  though  there  may  be  cases  in  which  the 
intention  of  both  parties  may  be  of  effect,  as  where  a  mortgagee 
has  loaned  money  with  the  understanding  that  it  shall  be  applied 
to  enhance  the  value  of  the  estate  by  the  addition  of  chattels  in 
such  manner.    And  they  are  but  presumptions,  which  in  all  cases 
may  be  entirely  done  away  with  by  the  facts  (Lancaster  v.  Eve, 
5  C.  B.  [n.  s.]  717).    So  in  Elliott  v.  Bishop,  10  Exch.  496;  s.  c.  in 
error,  11  Exch.  113,  it  is  recognized  that  the  express  agreement 
of  a  tenant  may  prevent  him  from  the  exercise  of  his  right  to 
detach  his  annexations,  which  is  the  same  as  to  say  that  his  agree- 
ment having  shown  that  it  was  not  his  intention  to  remove  them, 
the  presumption  of  contrary  purpose  which  would  otherwise  arise 
is  repelled.     So  in  Potter  v.  Cromwell,  40  N.  Y.  287,  and  cases 
-cited,  it  is  conceded  that  if  the  intention  of  the  vendor  of  lands  be 
to  retain  in  chattels  annexed  thereto  their  character  as  personal 
property,  such  intention  will  prevail.    So  in  Voorhees  v.  McGinnis, 
supra,  it  is  conceded  that  if  the  intention  of  the  mortgagor  of  lands 
had  been  that  chattels  annexed  were  to  be  removable,  the  prior 
mortgagee  could  not  have  held  them  against  the  receiver  of  the 
goods,  &c.,  of  the  mortgagor.    See  also  Crane  v.  Brigham,  11  N.  J. 
Eq.  (3  Stockton),  29,  35;  Teaff  v.  Heicitf.  1  Ohio  St.  (ATcCook), 
511-531.     The  general  rules  governing  the  rights  of  parties  in 
chattels  thus  annexed  to  the  real  estate  rest,  as  it  appears,  upon 
the  presumptions  which  the  law  makes  of  what  their  purpose  is 
in  the  act  of  annexation.     This  presumption  grows  out  of  their 


348  COMMON    LAW   RELATIONS 

relation  to  and  interest  in  the  land,  and  not  from  the  relation  or 
interest  in  it  of  others  which  may  be  opposite.  And  as  the  pre- 
sumption of  their  purpose  grows  alone  out  of  their  relation  and 
interest,  it  is  repelled  by  whatever  signifies  a  purpose  different; 
not  a  different  purpose  in  those  holding  a  relation  which  may  be- 
come hostile,  but  their  own  different  purpose.  Hence,  I  conclude 
that  the  agreement  of  the  owner  of  the  land  with  the  plaintiffs,  as 
it  did  fully  express  their  distinct  purpose  that  these  annexations 
of  boiler  and  engines  should  not  make  them  a  part  of  the  real 
estate,  was  sufficient  to  that  effect  without  any  concurring  inten- 
tion of  the  defendants  as  prior  mortgagees. 

Though  the  defendants  became  the  purchasers  of  the  land  on 
the  foreclosure  of  the  mortgages,  and  were  the  owners  of  it  in  fee, 
and  probably  in  actual  possession  of  it,  and  of  the  boilers  and 
engines  annexed  to  it,  before  this  action  was  brought  or  demand 
made  of  them  for  these  chattels,  yet  they  are  to  be  considered  in 
this  case  only  as  prior  mortgagees  of  it.  Such  is  the  effect  of  the 
stipulation  made  by  them  that  the  sale  upon  the  decrees  should 
tiot  in  any  manner  change  the  legal  rights  of  the  plaintiffs  in  this 
kction;  but  for  this  it  would  have  been  necessary  to  have  deter- 
mined the  effect  upon  the  rights  of  the  parties  of  the  sale  on  fore- 
closure and  the  change  of  title  and  possession  of  the  lands,  and 
the  application  to  that  state  of  facts  of  the  principle  laid  down  in 
Lane  v.  King,  8  Wend.  584,  and  kindred  cases. 

It  appears  that  the  boilers  and  engine  cannot  be  removed  without 
some  injury  to  the  walls  built  up  about  them,  and  which  are  a  part 
of  the  real  estate;  yet  this  fact  will  not  debar  the  plaintiffs.  The 
chattels  have  not  become  a  part  of  the  building;  the  removal  of 
them  will  not  take  away  or  destroy  that  which  is  essential  to  the 
support  of  the  main  building  or  other  part  of  the  real  estate  to 
which  they  were  attached;  nor  will  it  destroy  or  of  necessity  injure 
the  chattels  themselves;  nor  will  the  injury  to  the  walls  about  them 
be  great  in  extent  or  amount.  So  that  the  limitation  hereinbefore 
stated  does  not  apply. 

It  is  proper  to  add  that  the  English  case  cited  and  much  relied 
upon  by  the  defendants  has  not  been  overlooked  (Walmsley  v. 
Milne,  7  C.  B.  [n.  s.]  115).  I  do  not  gather  from  it  that  the  de- 
cision was  placed  upon  the  ground  (as  the  defendants  claim) 
that  the  mortgagee  of  the  land  did  not  expect  or  understand  that 
the  chattels  annexed  were  removable  or  to  be  removed.  The  opin- 
ion of  the  court  seems  summed  up  in  the  concluding  sentence: 
"We  think,  therefore,  that  when  the  mortgagor  (who  was  the  real 


REYNOLDS   V.    ASHBY    &    SON  349 

owner  of  the  inheritance)  after  the  date  of  the  mortgage  annexed 
the  fixtures  in  question  for  a  permanent  purpose  and  for  the  better 
enjoyment  of  his  estate,  he  thereby  made  them  a  part  of  the  free- 
hold which  had  been  vested  by  the  mortgage  deed  in  the  mort- 
gagee." It  is  to  be  borne  in  mind,  too,  that  in  England  and  in 
Massachusetts  the  rights  of  a  mortgagee  of  land  in  the  mortgaged 
premises  are  greater  than  in  this  State.  He  is  regarded  as  the 
owner  and  the  mortgagor  in  the  hght  of  a  tenant.  So  that  things 
annexed  to  the  land  become  fixtures  upon  the  land  of  the  mort- 
gagee, as  it  were.  See  case  last  cited,  page  133;  Butler  v.  Page, 
7  Mete.  40. 

The  judgment  should  be  affirmed,  with  costs  to  the  respondents. 
All  concur. 

Judgment  affirmed.^ 

REYNOLDS   v.  ASHBY  &  SON 
House  of  Lords,  1904 
(L.  R.  [1904]  A.  C.  466) 

HoLDWAY,  the  lessee  of  land  in  Reading  for  ninety-nine  years 
from  1892,  was  in  April,  1900,  building  a  factory  thereon  for  a 
joinery  business.  On  April  7  Holdway  mortgaged  the  premises  to 
Burrows,  "together  with  the  buildings,  fixtures,  machinery  and 
fittings  erected  thereon."  Holdway  afterwards  executed  a  second 
mortgage  to  Hatt,  and  on  August  27  a  third  mortgage  to  the  re- 
spondents. 

On  August  30  Holdway  and  the  appellant  (a  manufacturer  of 
machines)  made  a  hire-purchase  agreement,  whereby  the  appellant 
agreed  to  let  machinery  to  be  used  in  the  factory,  and  Holdway 
agreed  to  hire  and  to  pay  for  it  by  instalments  at  specified  times, 
the  machinery  to  become  the  property  of  Holdway  as  soon  as  the 
payments  were  all  duly  made,  but  if  default  was  made  in  punctual 
payment  of  any  of  the  instalments  Holdway  might  determine  the 

^  Duffus  V.  Howard  Furnace  Co.,  ten  v.  Liddell,  110  Ala.  232  (1895); 

8   App.    Div.    (N.    Y.)    567    (1896);  Willis  v.   Munger  Machine  Co.,    13 

Eaves  v.  Estes,  10  Kans.  314  (1872);  Tex.  Civ.  App.  677   (1896),  accord. 

Cochranv.  Flint,  57  N.}i.5U  (1877);  And    compare   McFadden   v.    Allen, 

First  National  Bank  v.  Elmore,   52  134  N.  Y.  489  (1892),  and  Brannon 

Iowa,  541  (1879);  Campbell  v.  Roddy,  v.  Vaughan,  66  Ark.  87  (1898). 
44  N.  J.  Eq.  244  (1888);  Bnnkley  v.  See   also  note,  13  Col.  Law  Rev. 

Forkner,  117  Ind.  176  (1888);  War-  247-249  (1913). 


350  COMMON    LAW   RELATIONS 

hiring  and  enter  and  resume  possession  of  the  machinery,  which  was 
to  continue  to  be  the  sole  and  absolute  property  of  the  appellant 
until  the  last  payment  was  made. 

In  September  the  machines — heavy  carpenter's  tools — were  put 
up  on  the  ground  floor  of  the  factory  (in  the  words  of  Lord  Lind- 
ley's  judgment)  "on  beds^f  concrete  prepared  for  them.  The  ma- 
chines were  worked  by  steam  power  transmitted  from  a  steam 
engine  by  shafts,  wheels,  and  gearing  in  the  usual  way.  Each 
machine  was  complete  in  itself.  Each  was  fastened  down  to  its 
concrete  bed  by  bolts  and  nuts.  The  bolts  were  firmly  fixed  in  the 
concrete  and  passed  through  and  projected  beyond  holes  in  the 
machine.  The  nuts  were  screwed  on  the  ends  of  the  bolts  where 
they  projected,  and  the  machines  were  thus  held  fast.  By  unscrew- 
ing the  nuts  each  machine,  although  heavy,  could  no  doubt  be 
raised  up  and  removed  without  injury  to  the  building  containing 
it,  and  without  injury  to  its  concrete  bed  and  to  the  bolts  embedded 
in  it." 

In  November  Hatt  took  po^^eseion  of  the  premises  under  his 
mortgage,  and  Holdway  having  made  default  in  pajonent  the  ap- 
pellant gave  him  notice  determining  the  hiring  and  demanding  the 
return  of  the  machinery.  In  December  the  respondents  took 
transfers  of  the  prior  mortgages,  having  bought  up  the  mortgagees' 
interests.  The  respondents  having  refused  to  deliver  up  the  ma- 
chinery the  appellant  brought  this  action  against  them,  claiming 
the  machinery  or  damages.  Lawrance,  J.,  who  tried  the  action  did 
not  leave  any  question  to  the  jury  and  entered  judgment  for  the 
defendants.  This  decision  was  affirmed  by  the  Court  of  Appeal 
(Collins,  M.  R.,  Romer  and  Mathew,  L.  J  J.)  [1903]  1  K.  B.  87. 
Hence  this  appeal.^ 

Lord  James.  My  Lords,  it  must  be  taken  that  the  appellant 
was  aware  that  the  machines  would  be  used  in  a  factory  and  would 
be  affixed  in  the  usual  manner  to  the  building. 

In  the  first  instance  I  was  disposed  to  think  that  the  question  of 
chattel  or  fixture,  being  one  of  fact,  ought  necessarily  to-have "been 
submitted  to  tlie  j liryTbut  apparently"  the  course  taken  by  the 
learned  judge  in  treating  the  question  as  one  of  law,  or  as  one  of 
fact  upon  which  the  jur\'  were  bound  to  accept  his  directions  and 
apply  the  law  as  declared  by  him,  was  correct,  and  certainly  was 
acquiesced  in  by  both  parties  to  the  suit. 

1  Concurring;  opinions  of  the  Earl  MAC^fAGHTEX  and  Lindley  are 
of  Halsbury,  L.  C,  and  of  Lords       omitted. 


REYNOLDS    V.    ASHBY    &    SON  351 

The  manner  in  which  the  machines  were  affixed  to  the  buildings 
has  been  clearly  brought  to  the  notice  of  your  Lordships,  and  is 
shewn  by  some  sketches  set  out  in  the  case.  This  affixing  of  the 
machines  is  to  obtain  steadiness,  and  effects  the  usual  condition 
under  which  such  machines  are  used. 

My  Lords,  the  authorities  controlling  the  questions  respecting 
the  difference  between  fixtures  and  chattels  are  very  numerous, 
and  have  arisen  between  different  parties.  The  rights  of  landlord 
or  tenant,  of  mortgagor  or  mortgagee,  and  Hability  to  being  rated, 
have  all  brought  this  question  to  a  legal  issue  for  the  determination 
of  our  Courts. 

I  do  not  propose  to  review  those  authorities  in  detail,  but  having 
consulted  and  considered  them,  I  have  come  to  the  conclusion  that 
the  weight  of  authority  is  in  favour  of  the  view  that  these  machines 
must  be  held  to  be  affixed  to  the  building  so  as  to  pass  under  the 
mortgage  as  being  a  portion  of  the  factory. 

The  cases  supporting  this  view  are  very  numerous,  but  the  prin- 
cipal case  now  generally  referred  to  is  that  of  Hohson  v.  Gorringe, 
[1897]  1  Ch.  182,  the  authority  which  Lawrance,  J.,  acted  upon. 
Doubtless  there  are  cases  and  dicta  upon  which  the  appellants  are 
entitled  to  rely.  Hellawell  v.  Eastwood,  6  Ex.  295,  and  several 
other  cases  were  relied  upon  at  the  bar  to  show  that  these  ma- 
chines should  be  regarded  as  chattels — but  in  none  of  these  cases 
did  the  question  arise  between  mortgagor  and  mortgagee,  and  in 
some  of  them  the  decisions  are  explained  upon  grounds  other  than 
those  existing  in  the  present  case. 

My  Lords,  it  was  argued  at  the  bar  that  as  Holdway  had  not 
paid  for  the  machines  they  remained  the  property  of  the  appellant, 
and  could  not  by  any  act  of  Holdway  be  dealt  with  as  fixtures,  but 
the  argument  cannot,  I  think,  prevail.  The  machines  were  sold 
by  the  appellant  for  the  purpose  of  being  used  in  the  manner  inj 
which  they  were  used.  In  order  so  to  use  them  it  was  necessary 
that  they  should  be  fixed,  and  so  become  part  of  the  building. 

For  these  reasons  I  feel  that,  following  a  great  preponderance  of 
authority,  your  Lordships'  judgment  should  be  in  favour  of  the 
respondents. 

Order  of  the  Court  of  Appeal  affirmed  and  appeal  dismissed  with 
costs. 


352  COMMON    LAW   RELATIONS 

STONE  V.   LIVINGSTON 

Supreme  Judicial  Court  of  Massachusetts,  1915 

(222  Mass.  192) 

Pierce,  J.  The  plaintiff,  as  trustee  in  bankruptcy  of  Dennis  D. 
O'Connell,  sues  the  defendant  in  tort  for  the  conversion  of  forty- 
nine  looms  and  the  dressing,  or  preparatory  weaving,  dyeing  and 
finishing  machinery  contained  in  the  mill  of  O'Connell  on  July  30, 
1913,  the  day  he  was  duly  adjudicated  bankrupt.  On  August  7, 
1913,  the  defendant,  in  foreclosure  of  a  real  estate  mortgage  given 
him  by  O'Connell  on  January  8,  1913,  duly  sold  the  estate  and 
property  definitely  described  therein,  as  also  the  property  alleged 
to  have  been  converted  by  the  sale,  under  the  claim  that  it  was  to 
be  treated  as  real  estate  and  as  such  was  included  though  not 
specifically  mentioned,  in  the  mortgage. 

The  estate  described  in  the  mortgage  was  purchased  in  1900  by 
George  J.  Daniels  and  the  bankrupt  Dennis  D.  O'Connell,  and 
thereafter  was  held  by  them  as  copartners  until  the  dissolution  of 
the  firm  in  1903,  at  which  time  O'ConneU  acquired  the  entire  firm 
title.  The  description  of  the  estate  and  property  conveyed  was 
identical  in  its  terms  to  that  thereafter  used  in  the  deed  of  Daniels 
to  O'Connell  and  in  the  mortgage  deed  of  O'Connell  to  the  defend- 
ant Solomon  H.  Livingston,  dated  January  8,  1913,  and  read  as 
follows:  "That  certain  tract  or  parcel  of  land  with  the  buildings 
thereon  and  all  the  privileges  and  appurtenances  thereto  belonging 
situated  .  .  .  and  including  with  the  real  estate  hereby  conveyed 
and  as  a  part  thereof  the  engine,  fixed  shafting,  dynamo,  main 
belt,  pump,  electric-light  wiring,  thermostats  and  sprinklers  now 
on  and  attached  to  the  premises,  including  steam  piping."  The 
fact  that  the  articles  enumerated  in  the  schedule  following  the 
description  of  the  land  included  all  property  at  the  time  of  the  con- 
veyance upon  the  premises  not  in  its  nature  realty,  and  the  further 
fact  that  there  w^as  no  machinery  there  for  a  worsted  mill,  leads  to 
the  conclusion  that  the  purpose  of  the  deeds  was  not  to  exclude  a 
grantee's  possible  claim  that  the  effect  of  the  conveyance  was  to 
ti'ansfer  the  title  to  other  property,  but  on  the  contrary  was  in- 
tended to  remove  from  the  realm  of  discussion  the  articles  scheduled 
and  to  place  them  within  the  conveyance.  Following  the  purchase 
of  the  plant  the  firm  acquired  by  bill  of  sale  a  conditional  title  to 


STONE   V.    LIVINGSTON  353 

and  possession  of  thirty-two  second  hand  looms  not  made  especially 
for  the  business  of  the  firm  but  such  as  are  usually  carried  in  stock. 

These  machines,  each  weighing  from  twenty-eight  hundred  to 
three  thousand  pounds,  were  fastened  to  the  floor  by  lag  screws 
to  keep  them  stationary  and  to  prevent  them  from  wabbling  "all 
over  the  floor."  Lag  screws  are  six,  eight  or  ten  inches  long,  one 
quarter  of  an  inch  to  two  inches  in  diameter,  and  are  like  ordinary 
screws  with  the  exception  of  the  head,  which  is  made  of  wrought 
iron.  The  looms  and  other  machinery  in  controversy  could  be 
removed  without  any  damage  to  themselves  or  to  the  building  in 
which  they  were  contained.  The  looms  and  other  machinery  were 
necessary  to  the  conduct  of  a  worsted  mill,  but  were  just  as  suit- 
able for  use  in  any  other  mill  as  in  the  firm's  mill. 

Much  of  the  machinery  other  than  the  looms  was  as  heavy,  or 
heavier,  than  the  looms,  was  attached  in  like  manner  to  the  floor, 
and  the  firm's  right  thereto  was  acquired  by  conditional  sale. 

On  January  29,  1903,  Daniels,  in  addition  to  his  deed  of  the  real 
estate,  sold  to  O'Connell  by  bill  of  sale,  "all  the  machinery  and 
stock  raw  and  wrought  and  in  process — all  finished  goods  and  all 
personal  property  of  every  kind  and  description  to  which  I  have 
any  title  by  virtue  of  the  partnership."  Between  January  29, 
1903,  and  January  8,  1913,  O'Connell  purchased  new  machinery 
in  replacement  of  the  old,  to  some  extent,  as  also  sixteen  new  looms, 
ten  of  which  were  held  under  such  rights  as  are  conferred  upon  a 
grantee  by  a  conditional  sale.  At  the  execution  of  the  mortgage 
to  the  defendant  at  least  twenty  of  the  forty-nine  looms  in  the  mill 
were  subject  to  the  terms  and  conditions  of  conditional  sale,  as  was 
also  an  undefined  portion  of  the  other  machinery.  None  of  the 
machinery  was  put  into  the  mill  after  the  execution  of  the  mort- 
gage deed  to  the  defendant.  Whether  the  defendant  had  or  had  not 
knowledge  of  the  conditional  nature  of  his  mortgagor's  interest 
in  the  machines  does  not  appear. 

At  the  close  of  the  evidence  the  plaintiff  contended  that  the 
court  ought  to  rule,  as  matter  of  law,  that  the  machinery  in  con- 
troversy did  not  pass  by  the  mortgage,  and  that  a  verdict  should 
be  directed  for  the  plaintiff  for  $4,400  [the  agreed  value  of  the  prop- 
erty in  controversy]  with  interest  from  July  18,  1913,  the  date  of 
the  entry  to  foreclosure.  The  defendant  contended  that  the  court 
should  rule  as  matter  of  law  that  the  machinery  in  controversy 
was  real  estate  and  that  a  verdict  should  be  directed  for  the  defend- 
ant. 

The  presiding  judge  gave  to  the  jury  full  and  accurate  instruc- 


354  COMMON    LAW   RELATIONS 

tions  defining  the  nature  of  real  and  personal  property,  to  which  no 
exceptions  were  taken.  He  then  submitted  to  the  jury  this  ques- 
tion: "Was  the  machinery  in  question  real  estate  or  personal  prop- 
erty?" to  which  the  jury  made  answer,  "Personal  property." 

Therefore  the  judge  directed  a  verdict  for  the  plaintiff  for  $4,400 
and  interest,  and  reported  the  case  to  this  court;  judgment  "to  be 
entered  upon  the  verdict,  or  for  the  defendant,  or  a  new  trial  or- 
dered as  the  case  requires." 

It  is  clear  that  the  decisions  fall  into  some  one  of  three  classes: 

1.  Those  where  the  chattel  has  been  so  affixed  that  its  identity  is 
lost,  or  so  annexed  that  it  cannot  be  removed  without  material 
injury  to  the  real  estate  or  to  itself.  Pierce  v.  Goddard,  22  Pick. 
559. 

2.  Those  articles  which  are  manifestly  furniture  as  distinguished 
from  improvements.  Southhridge  Savings  Bank  v.  Mason,  147 
Mass.  500,  505;  Hook  v.  Bolton,  199  Mass.  244,  247. 

As  regards  these  two  classes  the  facts  rebut  all  other  evidence  of 
intention  to  the  contrary. 

3.  Those  cases  where  intention  is  the  controlling  fact  and  where 
such  fact  is  to  be  determined  upon  consideration  of  all  the  circum- 
stances, including  therein  the  adaptation  to  the  end  sought  to  be 
accomplished  and  the  means,  form  and  degree  of  annexation.  "It 
is  an  intention  which  settles,  not  merely  his  own  rights,  but  the 
rights  of  others  who  have  or  who  may  acquire  interests  in  the  prop- 
erty. They  cannot  know  his  secret  purpose;  and  their  rights 
depend,  not  upon  that,  but  upon  the  inferences  to  be  drawn  from 
what  is  external  and  visible.  In  cases  of  this  kind  every  fact  and 
circumstance  should  be  considered  which  tends  to  show  what  in- 
tention, in  reference  to  the  relation  of  the  machine  to  the  real 
estate,  is  properly  imputable  to  him  who  put  it  in  position."  Hope- 
well Mills  V.  Taunton  Savings  Bank,  150  Mass.  519,  522. 

In  the  case  at  bar  it  properly  could  not  have  been  ruled  that  the 
machines  had  been  so  affixed  to  the  real  estate  or  to  other  chattels 
which  were  to  be  treated  as  real  estate  (Hopewell  Mills  v.  Taunton 
Savings  Bank,  supra),  that  they  had  lost  their  identity  or  had  be- 
come incapable  of  removal  without  material  injury  to  themselves 
or  to  the  building  to  which  they  were  attached.  Nor  could  it  have 
been  ruled  that  they  were  not  to  be  treated  as  real  estate  but  were 
chattels.  In  view  of  the  undisputed  fact  that  the  machines  were 
not  especially  designed  for  use  upon  the  premises,  were  not  pe- 
culiar in  their  pattern,  were  easily  removable  without  injury  to 
themselves  or  to  the  structure  in  which  they  were  placed,  were 


STONE    V.    LIVINGSTON  355 

equally  adapted  for  use  in  any  other  worsted  mill,  were  purchased 
and  sold  from  stock,  were  in  large  part  held  by  the  mortgagors 
upon  a  conditional  sale  title,  were  put  into  the  mill  before  the  exe- 
cution of  the  mortgage  to  the  defendant;  in  view  also  of  the  fact 
of  the  silence  of  the  record  upon  the  matter  of  the  mortgagee's 
knowledge  or  ignorance  of  the  quality  of  his  mortgagors'  title,  and 
of  the  further  fact  that  as  between  the  members  of  the  firm  the 
machinery  was  treated  as  chattels  when,  upon  the  dissolution  of  the 
firm,  Daniels  sold  to  O'Connell  by  bill  of  sale  "all  the  machinery" 
and  at  the  same  time  gave  a  deed  of  all  his  interest  in  the  real 
estate,  and,  upon  all  the  reported  testimony,  we  are  of  opinion 
that  a  question  of  fact  was  presented  and  that  it  was  properly 
submitted  to  the  jury.  Maguire  v.  Park,  140  Mass.  21.  Carpenter 
V.  Walker,  140  Mass.  416,  420.  Smith  v.  Bay  State  Savings  Bank, 
202  Mass.  482. 

AVe  find  no  error  in  the  admission  or  rejection  of  testimony  prej- 
udicial to  the  defendant. 

In  accordance  with  the  terms  of  the  report  judgment  is  to  be 
entered  upon  the  verdict. 

So  ordered} 

1  In    Central    Union    Gas    Co.    v.       ranges    as    fixtures,    but    they    re- 
Broioning,  210  N.  Y.  10  (1913),  held,      mained  personal  property, 
mortgagee  secured  no  right  to  gaa 


CHAPTER   I.    (Continued) 
Section  V. — Waste  and  Repair 

KING  V.  SMITH 

High  Court  of  Chancery,  1843 

(2  Hare,  239) 

W.  Smith  conveyed  and  surrendered  certain  freehold  and  copy- 
hold estates  to  the  use  of  J.  Reid  and  his  heirs,  by  way  of  mortgage, 
to  secure  £2700  and  interest.  W.  Smith,  by  his  will,  gave  all  his 
real  and  personal  estate  to  the  defendant,  S.  Smith  (who  was  also 
his  heir-at-law,  customary  heir,  and  sole  executor),  "in  hopes  that 
he  might  be  able  to  pay  his  (the  testator's)  just  debts,  and  find 
a  surplus  for  his  trouble."  J.  Reid  devised  his  legal  interest  in 
the  mortgaged  premises  to  the  plaintiffs,  and  appointed  them  his 
executors.  The  plaintiffs,  by  their  bill,  charged  that  the  mortgaged 
premises  were  a  "scanty  security"  for  the  principal  and  interest 
due,  and  that  the  plaintiffs  were  entitled  and  claimed  to  be  specialty 
creditors  upon  the  general  estate  of  the  mortgagor  for  the  defi- 
ciency, and  that,  to  ascertain  the  same,  the  mortgaged  premises 
ought  to  be  sold.  The  bill  prayed  an  account  of  the  mortgage 
debt,  a  sale  accordingly,  and  payment  out  of  the  proceeds;  and 
if  the  same  were  insufficient,  that  the  plaintiffs  might  be  declared 
to  be  specialty  creditors  upon  the  estate  for  the  deficiency;  that,  if 
necessary,  the  suit  might  be  taken  as  being  on  behalf  of  the  plain- 
tiffs, and  all  other  the  unsatisfied  creditors  of  W.  Smith,  and  the 
personal  and  real  estate  duly  administered  and  applied. 

After  appearance  and  before  answer  the  plaintiffs  filed  their 
supplemental  bill,  stating  that,  since  the  original  bill  was  filed,  the 
defendant  had  felled,  and  was  proceeding  to  fell  and  carry  away 
large  numbers  of  timber  and  timber-like  trees  which  were  growing 
on  the  mortgaged  premises,  that  many  of  such  trees  were  lying 
upon  the  lands,  and  had  been  advertised  for  sale,  and  praying  an 
account  of  the  trees  felled,  and  of  the  monies  produced  by  the  sale, 
356 


KING   V.   SMITH  357 

and  an  injunction  to  restrain  the  felling  and  sale  of  trees  from  the 
mortgaged  premises. 

The  plaintiffs  moved  for  the  injunction,  according  to  the  prayer. 

Vice-Chancellor  [Wigram].  It  is  now  an  established  rule  that 
if  the  security  of  the  mortgagee  is  insufficient,  and  the  court  is 
satisfied  of  that  fact,  the  mortgagor  will  not  be  allowed  to  do 
that  which  would  directly  impair  the  security— cut  timber  upon 
the  mortgaged  premises.  It  has  been  argued  that  if  the  bill  be 
for  a  foreclosure,  when  the  mortgagee  seeks  to  take  the  whole 
estate,  the  court  will  not  prevent  him  [the  mortgagor],  pending 
that  suit,  from  cutting  timber  or  receiving  rents,  or  doing  any  other 
act  incident  to  the  ownership;  but  that,  if  the  plaintiff  sued  as 
a  general  creditor,  the  court  would  give  him  the  relief  by  injunc- 
tion. That,  however,  is  not  the  distinction.  The  rule  would  be 
rather  the  other  way.  The  plaintiff,  in  a  foreclosure  suit,  asks 
nothing  more  than  the  estate,  whilst  the  plaintiff,  in  creditors'  suit, 
seeks  the  application,  not  only  of  the  mortgaged  estate,  but,  if 
necessary,  of  the  general  estate  also,  in  payment  of  his  debt.  It  is 
very  difficult  to  suppose  that  a  mere  creditor  can  have  any  such 
right  as  the  argument  assumes.  On  what  principle  is  the  executor 
and  trustee  of  real  estate  to  be  restrained  at  the  suit  of  a  general 
creditor  from  acting  according  to  his  judgment  in  the  management 
of  the  property? 

I  think  the  allegation  in  the  bill,  that  the  mortgaged  premises 
are  a  scanty  security  for  the  debt,  is  a  sufficient  foundation  for 
admitting  evidence  of  the  value  of  the  estate. 

Vice-Chancellor.  The  cases  decide  that  a  mortgagee  out  of 
possession  is  not  of  course  entitled  to  an  injunction  to  restrain  the 
mortgagor  from  cutting  timber  on  the  mortgaged  property.  If  the 
security  is  sufficient,  the  court  will  not  grant  an  injunction  merely 
because  the  mortgagor  cuts,  or  threatens  to  cut,  timber.  There 
must  be  a  special  case  made  out  before  this  court  will  interpose. 
The  difficulty  I  feel  is  in  discovering  what  is  meant  by  a  "sufficient 
security."  Suppose  the  mortgage  debt,  with  all  the  expenses,  to  be 
£1000,  and  the  property  to  be  worth  £1000,  that  is,  in  one  sense, 
a  sufficient  security;  but  no  mortgagee  who  is  well  advised  would 
lend  his  money  unless  the  mortgaged  property  was  worth  one-third 
more  than  the  amount  lent  at  the  time  of  the  mortgage.  If  the 
property  consisted  of  houses,  which  are  subject  to  many  casualties 
to  which  land  is  not  liable,  the  mortgagee  would  probably  require 
more.    It  is  rather  a  question  of  prudence  than  of  actual  value. 


358  COMMON   LAW   RELATIONS 

I  think  the  question  which  must  be  tried  is  whether  the  property 
the  mortgagee  takes  as  a  security  is  sufficient  in  this  sense— that 
the  security  is  worth  so  much  more  than  the  money  advanced 
that  the  act  of  cutting  timber  is  not  to  be  considered  as  substan- 
tially impairing  the  value,  which  was  the  basis  of  the  contract  be- 
tween the  parties  at  the  time  it  was  entered  into.  I  have  read  the 
affidavit,  and  I  cannot  find  that  either  the  rental  or  income  of  the 
property  appears;  but  it  seems  that  the  substantial  part  of  it  con- 
sists of  houses,  which  might  make  it  a  more  serious  question 
whether  the  court  should  permit  the  mortgagor  to  cut  the  timber. 
The  supplemental  bill,  which  states  the  circumstances  with  respect 
to  the  timber  and  prays  the  injunction,  contains  no  case  with 
reference  to  the  insufficiency  of  value,  nor  does  the  plaintiff,  by 
his  affidavit,  make  any  such  case.  The  bill  and  affidavit  appear  to 
proceed  on  the  supposition  that  the  mortgagor  has  no  right  to  cut 
the  timber  under  any  circumstances.  In  the  valuation  which  is 
attempted  to  be  shewn,  I  am  not  told  the  quantity  of  the  land,  or 
the  rental;  nor  can  I  discover  of  what  class  the  houses  are,  or 
whether  they  are  tenanted  or  not,  or  what  is  the  nature  of  the 
property  generally. 

It  is  stated,  on  the  defendant's  affidavits,  that  he  did  not  cut 
any  of  the  trees  with  the  intention  of  injuring  the  estate,  but  on 
the  contrary  he  did  it  in  the  due  and  proper  course  of  husbandry 
and  management.  What  is  meant  by  felling  twenty-one  large  elm 
trees  in  due  course  of  husbandry,  I  cannot  comprehend.  It  is 
obvious  that  the  defendant  is  using  language  of  which  he  does  not 
know  the  effect.  There  being,  however,  no  abstract  right  on  the 
part  of  a  mortgagee  to  say  that  the  mortgagor  shall  not  cut  timber, 

1  am  satisfied  that  there  must  be  clearer  evidence  of  the  value  be- 
fore me,  or  I  cannot  grant  the  injunction. 

Let  the  motion  stand  over,  with  liberty  to  apply.  If  the  defend- 
ant proceeds  to  cut  more  timber,  the  plaintiff  can  renew  his  ap- 
plication, and  bring  before  me  a  case  upon  which  I  can  adjudicate, 
and  then  the  costs  of  this  motion  will  be  disposed  of.  I  should 
be  very  reluctant  to  decide  it  without  knowing  what  is  the  actual 
value  of  the  security  which  has  been  accepted  by  the  mortgagee,  or 
whether  he  is  really  secured  or  not.^ 

iThis  represents  the  general  rule  649  (1884),  {semble);  Moriarty  v. 
in  this  country:  Brady  v.  Waldron,      Ashivorth,  43  Minn.  1  (1890).    That 

2  Johns.  Ch.  148  (1816);  Fairbank  v.  the  right  to  an  injunction  to  restrain 
Cudworth,  33  Wis.  358  (1873);  Em-  waste  by  the  mortgagor  is  absolute, 
mons  V.  Hinderer,  24  N.  J.  Eq.  39  see  Nelson  v.  Pinegar,  30  111.  473 
(1873);  Triplett  v.  Parmlee,  16  Neb.       (1863). 


STOWELL    V.    PIKE  359 

Peterson  v.  Clark,  15  Johns.  205  (1818).  Per  Curiam.  There 
can  be  no  doubt  but  that  the  deed  from  Van  Camp  to  Clark,  and 
defeasance  given  back,  amounted  only  to  a  mortgage,  and  the 
simple  question  then  is,  whether  a  mortgagee  can  maintain  an 
action  of  waste  against  the  mortgagor,  before  the  forfeiture  of  the 
mortgage;  for  the  waste  alleged  to  have  been  committed  in  this 
case  was  before  the  expiration  of  the  time  limited  for  the  payment 
of  the  money  secured  by  the  mortgage.  Indeed,  the  present  suit 
w^as  commenced  before  that  time.  Waste  is  an  injury  done  to  the 
inheritance,  and  the  action  of  waste  is  given  to  him  who  has  the 
inheritance  in  expectancy,  in  remainder,  or  reversion;  but  it  is 
expressly  laid  down  by  Blackstone  (3  Bl.  Com.  225).  that  he  who 
hath  the  remainder  for  life  only  is  not  entitled  to  sue  for  the  waste, 
since  his  interest  may  never,  perhaps,  come  into  possession,  and 
then  he  has  suffered  no  injury.  So.  likewise,  with  respect  to  the 
mortgagee,  especially  when  the  mortgage  is  not  forfeited,  his  in- 
terest in  the  land  is  contingent,  and  may  be  defeated  by  pajTnent  of 
the  money  secured  by  the  mortgage;  and  it  must  follow,  as  matter 
of  course,  that  he  has  not  such  interest  in  the  timber  as  to  sustain 
an  action  of  trover.  The  judgment  of  the  court  below  must  be 
reversed. 

STOWELL  V.  PIKE 
Supreme  Judicial  Court  of  Maine,  1823 

(2  Greenl  387) 

In  an  action  of  trespass  quare  clausum  f regit,  the  case  was  thus: 
The  plaintiff,  by  his  deed  dated  September  15th,  1819,  bargained 
and  sold  the  close  described  in  the  writ  to  one  Bickford,  in  fee, 
taking  from  Bickford,  at  the  same  time,  a  mortgage  of  the  same 
land,  to  secure  the  payment  of  the  purchase  money,  for  which 
Bickford  also  gave  his  notes  of  hand  to  the  plaintiff,  amounting  to 
three  hundred  and  thirty  dollars,  payable  at  different  periods  in 
the  course  of  two  years  and  a  half,  with  interest.  In  the  course 
of  the  spring  following,  Bickford  paid  his  first  instalment;  and,  in 
December,  1820,  he  sold  all  the  timber  then  standing  on  the  prem- 
ises, to  the  value  of  two  hundred  and  thirty  dollars,  to  the  defend- 
ant, Pike,  and  others,  w^ho,  with  the  other  defendants  in  their  em- 
plojnnent,  without  license  from  the  plaintiff,  cut  it  down  and 
converted  it  to  their  own  use,  for  which  cutting  this  action  was 
brought.     Bickford  in  continued  possession  of  the  premises  from 


360  COMMON    LAW   RELATIONS 

the  date  of  his  deed  till  after  the  cutting  of  the  timber,  when  the 
plaintiff  entered  upon  him  for  condition  broken,  the  residue  of  the 
purchase  money  being  still  due. 

Upon  these  facts  the  parties  submitted  the  cause  to  the  decision 
of  the  court,  the  defendants  waiving  any  objection  to  the  form  of 
action. 

Mellen,  C.  J.,  delivered  the  opinion  of  the  court,  as  follows: 
If  A.  mortgage  lands  to  B.  in  fee,  the  legal  estate  is  considered 
to  be  in  B.  as  between  him  and  A.  and  those  claiming  under  A.; 
but  as  to  all  the  woild  but  B.,  A.  is  considered  as  seised  of  the  legal 
estate,  and  so  may  convey  to  C,  subject,  however,  to  the  mortgage 
(Blaney  v.  Bearce,  ante,  p.  132).  For  this  reason,  B.  may  maintain 
trespass  against  A.  and  those  claiming  under  him,  because  A.'s 
possession  is  in  submission  to  B.'s  title,  and  is,  in  fact,  the  posses- 
sion of  B.  In  Newall  v.  Wright,  3  Mass.  138,  Parsons,  C.  J.,  de- 
livering the  opinion  of  the  court,  says,  "It  is  very  clear  that, 
when  a  man  seised  of  lands  in  fee  shall  mortgage  them,  if  there 
be  no  agreement  that  the  mortgagor  shall  retain  the  possession,  the 
mortgagee  may  enter  immediately,  put  the  mortgagor  out  of  posses- 
sion, and  receive  the  profits;  and  if  the  mortgagor  refuses  to  quit 
the  possession,  the  mortgagee  may  consider  him  as  a  trespasser,  and 
may  maintain  an  action  of  trespass  against  him,  or  he  may,  in 
a  writ  of  entry,  recover  against  him  as  a  disseisor."  There  is 
nothing,  then,  in  the  relation  between  mortgagor  and  mortgagee, 
inconsistent  with  the  nature  of  an  action  of  trespass  by  the  latter 
against  the  former;  and  surely  a  mortgagor,  or  one  claiming  under 
him,  is  not  less  liable  for  an  injury  to  the  mortgagee  by  cutting 
down  and  carrying  away  timber  and  wood  from  the  premises,  than 
he  would  be  by  merely  withholding  the  possession  and  receiving 
the  rents  and  profits  to  his  own  use  {Union  Bank  v.  Emerson, 
15  Mass.  159;  Bro.  Tr.  55,  362;  5  Rep.  13;  Cro.  Eliz.  784).  We 
need  not,  however,  rely  on  these  cases,  or  decide  on  the  form  of 
action,  as  the  parties  have  waived  all  objections  to  form,  if  any 
exist.  But  on  these  principles  we  decided  the  case  of  Synith  v. 
Goodwin,  cited  for  the  plaintiff;  and,  on  the  same  principles,  we 
think  the  action  maintainable,  unless  the  alleged  usage  and  general 
understanding  with  respect  to  felling  trees  and  clearing  wild  lands, 
though  mortgaged  to  secure  pa>Tnent  of  the  purchase  money, 
should  be  considered  as  preventing  the  application  of  those  prin- 
ciples to  a  case  like  the  present.  It  was  urged  by  the  defendant's 
counsel  that  such  usage  and  general  tacit  understanding  are  equal 


COOPER    V.    DAVIS  361 

to  a  license  from  the  mortgagee  to  the  mortgagor  or  his  assignee,  to 
do  the  acts  which  are  charged  in  this  action  as  a  trespass.  The  facts 
in  the  case  do  not  present  this  question.  We  have  no  means  of 
knowing  whether  any  such  usage  and  general  understanding  exist. 
The  argument  of  the  counsel,  therefore,  cannot  avail,  as  it  does  not 
apply.  If  such  usage  and  understanding  existed  at  the  time  of  the 
transactions  of  which  we  have  been  speaking,  and  were  considered 
as  amounting  to  a  license,  and  pleadable  as  such  against  the  deed 
in  question,  they  should  have  been  disclosed  in  the  form  of  a  special 
plea,  and  the  question  arising  thereon  left  to  the  decision  of  the 
jury.  As  the  case  stands,  the  plaintiff  must  have  judgment  for 
the  value  of  the  timber  and  costs,  according  to  the  agreement  of 
the  parties.' 

COOPER  V.   DAVIS 

Supreme  Court  of  Errors  of  Connecticut,  1843 

(15  Conn.  556) 

This  was  an  action  of  trover  to  recover  the  value  of  a  pair  of 
Burr  mill-stones,  taken  by  the  defendant. 

The  cause  was  tried  at  New-Haven,  January  term,  1843,  before 
Waite,  J. 

The  plaintiff  claimed  title  to  the  property  in  question,  by  virtue 
of  a  sale  made  to  him  by  Walter  S.  Thompson  and  Charles  Cooper. 
The  defendant,  who  admitted  the  taking,  claimed  a  right  to  do  so, 
under  the  following  circumstances.  In  October,  1839,  he  was  the 
owner  of  an  old  grist-mill,  and,  having  purchased  a  tract  of  land 
for  the  site  of  a  new  grist-mill,  he  entered  into  a  written  contract 
with  Thompson,  Cooper  and  David  O.  Way,  to  build  and  complete 
the  new  mill.  After  they  had  erected  the  building  for  the  new 
mill,  and  before  it  was  completed  according  to  the  contract,  viz.,  on 
the  21st  of  February,  1840,  the  defendant  sold  and  conveyed  to 
them  the  whole  property  owned  by  him,  belonging  to  the  old  mill 
and  the  new  one,  including  the  mill-stones  in  question.  To  secure 
the  balance  of  the  purchase-money  unpaid  at  the  time  of  the  sale, 
they  afterwards,  on  the  same  day,  gave  two  promissory  notes,  and 
executed  and  delivered  to  the  defendant  a  mortgage  deed  of  the 
same  property.    At  this  time  said  mill-stones  had  been  taken  from 

^  Pettengill  v.  Evans,  5  N.  H.  54  condition  broken:  Lnngdon  v.  Paul^ 
(1829);  Dorr  v.  DvuMerar,  88  111.  107  22  Vt.  205  (1850);  //ajar  v.  Brainerd, 
(1878),  accord.    So  in  Vermont,  after      44  Vt.  294  (1872). 


362  COMMON    LAW   RELATIONS 

the  old  mill  and  placed  by  the  side  of  the  new  one,  to  be  used  for 
ils  completion.  They  soon  afterwards  finished  it,  and  put  it  in 
operation  for  grinding  corn  and  other  grain,  using  said  mill-stones 
for  this  purpose.  The  lower  stone  was  set  in  a  frame,  fastened  to 
the  floor  of  the  mill,  and  was  fastened  therein  by  means  of  wedges 
driven  between  the  stone  and  frame;  and  in  all  other  respects  the 
stones  were  placed  in  the  mill  in  the  manner  in  which  mill-stones 
are  usually  placed  in  grist-mills. 

Cooper  and  Way  having  failed  to  pay  one  of  their  notes  after 
it  became  due,  the  defendant  brought  his  bill  for  a  foreclosure, 
and,  at  the  term  of  the  Superior  Court  in  January,  1842,  obtained 
a  decree  against  them,  limiting  the  time  of  redemption  to  the  first 
Monday  of  Jul}'',  1842.  At  the  same  term  the  defendant  recovered 
judgment  against  them  in  an  action  of  ejectment  for  the  mort- 
gaged premises.  He  afterwards  took  out  execution  on  this  judg- 
ment, and  placed  it  in  the  hands  of  an  officer  to  be  executed.  The 
officer  made  demand  of  Thompson  and  Cooper  for  the  possession 
of  the  premises,  who  informed  him  that  he  lived  upon  them,  and 
requested  a  delay  of  one  week  that  he  might  remove  his  family 
therefrom;  to  which  the  officer  consented.  In  the  meantime 
Thompson  and  Cooper  repaired  to  the  mill  and  removed  therefrom 
the  mill-stones,  and  sold  them  to  the  plaintiff,  who  carried  them 
to  a  certain  shed  and  placed  them  there  for  safe-keeping.  The 
defendant  afterwards  found  them  in  the  shed,  took  them  away  and 
converted  them  to  his  own  use;  which  is  the  taking  complained  of 
in  the  declaration.  Cooper  and  Way,  the  mortgagors,  continued 
in  possession  of  the  mill  from  the  time  of  the  sale  made  to  them 
until  after  the  removal  of  the  mill-stones. 

Upon  these  facts  the  plaintiff  claimed  that  he  was  entitled  to  a 
verdict  in  his  favour;  that  the  mill-stones  were  not  conveyed  to 
the  defendant  by  virtue  of  the  mortgage  deed  and,  consequently, 
that  he  never  had  any  interest  in  them;  that  the  mortgagors,  having 
placed  them  in  the  mill  for  the  purpose  of  carrying  on  their  business, 
might  lawfully  remove  them  at  any  time  while  they  continued  in 
possession;  that  having  so  removed  them  they  might  legally  sell 
and  deliver  them  to  the  plaintiff,  and  the  plaintiff  prayed  the  court 
so  to  instruct  the  jury. 

The  court  did  not  so  instruct  them,  but  informed  them  that 
although  the  mill-stones  were  not  conveyed  to  the  plaintiff  by  vir- 
tue of  the  mortgage  deed,  yet,  having  been  placed  in  the  mill  in  the 
manner  stated,  they  became  annexed  to  the  freehold,  and  the 
mortgagors  had  no  right  to  remove  them  therefrom  and  convey 


COOPER   V.   DAVIS  363 

them  to  the  plaintiff,  especially  after  a  decree  of  foreclosure,  and 
judgment  in  an  action  of  ejectment  against  them. 

The  jury  returned  a  verdict  in  favour  of  the  defendant,  and  the 
plaintiff  moved  for  a  new  trial  for  a  misdirection. 

Waite,  J.  The  defendant  claimed  title  to  the  mill-stones  in 
question,  by  virtue  of  a  mortgage  made  to  him  of  certain  real 
estate,  upon  which  was  situated  a  grist-mill.  He  had  obtained 
against  the  mortgagors  a  decree  for  a  foreclosure,  and  a  judgment 
for  the  possession,  in  an  action  of  ejectment.  But  before  the 
expiration  of  the  time  limited  for  the  foreclosure,  and  before  he 
had  taken  actual  possession,  the  mortgagors  severed  the  stones 
from  the  mill  ^nd  sold  them  to  the  plaintiff.  The  defendant, 
having  afterwards  found  them,  took  possession  of  them  as  his  own 
property. 

The  question  arising  upon  these  facts  was  whether  the  plaintiff 
had  thus  acquired,  as  against  the  defendant,  a  valid  title.  Upon 
the  trial  in  the  court  below  it  was  supposed  that,  after  a  decree 
for  a  foreclosure  had  been  passed,  and  a  judgment  rendered  in  an 
action  of  ejectment  for  the  possession,  the  mortgagors  might  be 
considered  as  trespassers  in  removing  the  fixed  machinery  and 
cUsposing  of  it  in  the  manner  stated  in  the  motion. 

The  law  recognized  in  the  case  of  Hodgson  v.  Gascoigne  was 
thought  to  be  applicable  to  the  present  (5  B.  &  Aid.  81 ;  7  E.  C.  L. 
35).  It  was  there  holden  that  after  a  landlord  had  recovered  judg- 
ment against  his  tenant  in  an  action  of  ejectment  for  the  posses- 
sion of  the  demised  property,  the  tenant  ceased  to  have  any  in- 
terest in  the  growing  crops,  and  the  sheriff  had  no  right  to  le\y 
an  execution  upon  them. 

But,  upon  consideration,  we  are  all  satisfied  that  the  principle 
laid  down  in  that  case  does  not  apply  to  the  present.  There,  the 
question  was  as  to  the  relative  rights  of  a  landlord  and  tenant; 
here,  as  to  the  rights  of  a  mortgagor  and  mortgagee. 

By  repeated  decisions  it  is  now  fully  established  that  a  mort- 
gagor, before  his  right  of  redemption  is  foreclosed,  continues  the 
owner  of  the  real  estate  mortgaged;  that  he  is  not  accountable  for 
the  rents  and  profits,  nor  Hable,  in  an  action  at  law,  for  waste 
committed  while  in  possession.  The  mortgagee  has  merely  a  lien 
upon  the  property  for  the  security  of  his  debt,  by  virtue  of  which 
he  may  obtain  possession,  and  appropriate  the  pledge  in  payment 
of  his  debt. 

The  mortgagor  has,  indeed,  no  right  by  the  commission  of 


364  '  COMMON    L^W   RELATIONS 

waste  to  render  the  security  inadequate.  But  the  appropriate 
remedy  for  such  conduct  is  by  way  of  injunction.  If  the  security 
is  impaired  by  cutting  and  cariying  away  the  wood  and  timber, 
the  mortgagee  has  no  power  to  seize  them  after  they  have  been 
severed  and  carried  away;  but  his  duty,  in  such  case,  is  to  restrain 
the  mortgagor  from  such  acts  by  an  injunction. 

These  geneial  principles  are  not  denied.  But  it  is  claimed  that 
the  rights  of  the  defendant  have  been  varied  by  the  judgment  in 
his  favour  for  the  possession.  But  we  do  not  see  that  that  circum- 
stance can  make  any  material  difference.  He  had  not  taken  actual 
possession ;  nor  had  his  title  to  the  property  become  absolute  by  the 
decree.  He  stood,  simply,  in  the  character  of  mortgagee  out  of 
possession.  His  further  proceedings  in  relation  to  the  mortgage 
might  at  anj^  time  have  been  arrested  by  paying  him  his  debt. 
His  interest  in  the  property  continued  to  be  but  a  lien.  The  mort- 
gagors continued  in  possession,  and  as  such  were  the  owners.  The 
mill-stones,  after  they  had  been  severed  from  the  mill,  removed  and 
sold,  could  not  be  reclaimed  by  the  defendant  by  virtue  of  his 
mortgage.  And  although  the  design  of  the  mortgagors  probably 
was  to  impair  the  defendant's  security,  and  prevent  him  from 
collecting  the  full  amount  of  his  debt,  yet  we  cannot  say  that  he 
is  entitled  to  relief  in  the  manner  in  which  he  has  sought  it.  His 
duty  was  to  have  protected  his  rights  by  an  application  for  an 
injunction. 

Upon  this  gi'ound,  therefore,  without  adverting  to  the  other 
questions,  which  we  do  not  consider  it  necessary  to  examine,  we 
think  a  new  trial  must  be  granted. 

In  this  opinion  the  other  Judges  concurred. 

New  trial  to  he  granted} 

I  Kircher  v.  Schalk,  39  N.  J.  L.  335  Triplett    v.    Parmlee,    16    Neb.    64» 

(1877);   Clark  v.   Reyburn,   1   Kans.  (1884);  Verner  v.  Betx,  46  N.  J.  Eq. 

281  (1863);  Vanderslice  v.  Knapp,  20  256  (1889),  accord.     Compare  Buck- 

Kans.     647     (1878);     Tomlinson    v.  ow<  v.  Swn/^,  27  Cal.  433  (1865),  and 

Thompson,    27    Kans.    70     (1882);  Hill  v.  Gmn,  51  Cal  4.7  (1875). 


VAN    PELT    V.    MCORAW  365 

VAN  PELT  V.   McGRAW 

Court  of  Appeals  of  New  York,  1850 

(4  A^.  Y.  110) 

Van  Pelt  sued  Southworth  and  McGraw  in  the  Court  of  Com- 
mon Pleas  of  Tompkins  County,  and  declared  in  case  for  wrongfully 
and  fraudulently  removing  rails,  timber,  &c.,  from  certain  lands  on 
which  the  plaintiff  held  a  mortgage,  thereby  injuring  his  security, 
&c.  It  was  proved  on  the  trial  that  in  May,  1840,  Almeron  Baily 
and  William  E.  Baily,  being  the  owners  of  119  acres  of  land  in 
Dry  den,  Tompkins  County,  executed  a  bond  and  mortgage  cover- 
ing the  same  to  Harvey  A.  Rice,  to  secure  the  payment  of  $500,  one 
half  payable  in  May,  1841,  and  one  half  in  May,  1842.  In  August, 
1842,  Rice  sold  and  assigned  the  bond  and  mortgage  to  the  plain- 
tiff, who  instituted  a  foreclosure  suit  thereon,  and  obtained  the 
usual  decree  for  the  sale  of  the  premises  in  August,  1844.  The 
amount  then  due  on  the  mortgage,  including  the  costs  of  the  fore- 
closure suit,  was  nearly  nine  hundred  dollars.  The  mortgagors 
were  insolvent,  and  the  premises  were  an  inadequate  security  for 
this  sum.  On  the  sale  under  the  decree,  which  took  place  in  Oc- 
tober, 1844,  the  premises  produced  only  the  sum  of  $575.  Shortly 
before  the  sale  and  while  the  advertisement  was  running,  the  de- 
fendant McGraw,  who  had  become  the  owner  of  the  equity  of  re- 
demption by  conveyance  from  the  mortgagors,  avowing  that  he 
would  ''strip  the  land,"  proceeded  to  draw  off  rails,  and  to  cut 
down  and  draw  off  valuable  timber,  &c.  The  premises  were  thereby 
considerably  lessened  in  value.  These  acts  were  done  by  McGraw, 
and  by  Southworth  aiding  and  assisting  him,  with  full  knowledge 
of  the  plaintiff's  mortgage,  and  of  the  insolvency  of  the  mortgagors. 

The  defendants'  counsel  requested  the  court  to  charge  the  jury 
that  McGraw,  having  the  fee  of  the  land  and  being  in  possession, 
had  a  right  to  take  off  the  fences  and  timber,  and  that  these  acts, 
being  lawful,  could  not  be  deemed  to  have  been  done  wrongfully  or 
fraudulently.  The  court  charged  that  the  acts  were  lawful  if  they 
did  not  prejudice  the  plaintiff's  rights  or  impair  his  security,  but 
if  the  defendants  had  impaired  that  security  with  a  knowledge 
of  the  lien,  then  their  acts  were  wrongful  and  fraudulent.  The 
defendants'  counsel  also  requested  the  court  to  charge  that,  inas- 
much as  the  plaintiff  had  alleged  in  his  declaration  that  the  de- 
fendants did  the  acts  fraudulently  and  with  a  design  to  injure 


366  COMMON    LAW    RELATIONS 

the  plaintiff,  he  was  bound  to  prove  those  allegations  by  other 
evidence  than  the  mere  removal  of  the  rails  and  timber  for  their 
own  emoluuu^nt.  The  court  refused  so  to  charge.  To  the  charge 
as  delivered  and  to  the  refusal  to  charge  as  requested,  the  defend- 
ants excepted.  The  jury  found  a  verdict  of  $150  in  favor  of  the 
plaintiff.  The  judgment  entered  thereon  was  affirmed  in  the 
Supreme  Court  on  error  brought.  The  defendants  appealed  to 
this  court. 

Pratt,  J.  There  is  no  doubt  but  that  an  action  on  the  case  will 
lie  for  an  injury  of  the  character  complained  of  in  this  case.  It 
forms  no  objection  to. this  action  that  the  circumstances  of  the  case 
are  novel,  and  that  no  case  precisely  similar  in  all  respects  has 
previously  arisen.  The  action  is  based  upon  very  general  princi- 
ples, and  is  designed  to  afford  relief  in  all  cases  where  one  man  is 
injured  by  the  wrongful  act  of  another,  where  no  other  remedy 
is  provided.  This  injury  may  result  from  some  breach  of  positive 
law,  or  some  violation  of  a  right  or  duty  growing  out  of  the  relations 
existing  between  the  parties  (1  Cow.  Treat.  3). 

The  defendant  McGraw,  in  this  case,  came  into  the  possession 
of  the  land  subject  to  the  mortgage.  The  rights  of  the  holder  of 
the  mortgage  were  therefore  paramount  to  his  rights,  and  any 
attempt  on  his  part  to  impair  the  mortgage  as  a  security  was  a 
violation  of  the  plaintiff's  rights.  But  the  case  is  not  new  in  its 
circumstances.  The  case  of  Gates  v.  Joice,  11  John.  136,  was 
precisely  like  the  case  at  bar  in  principle.  That  action  was  brought 
by  the  assignee  of  a  judgment  against  a  person  for  taking  down 
and  removing  a  building  from  the  land  upon  which  the  judgment 
was  a  lien.  The  plaintiff's  security  was  thereby  impaired.  The 
court  in  that  case  sustained  the  action.  The  decision  in  that  case 
was  referred  to  and  approved  in  Lane  v.  Hitchcock,  14  John.  213, 
and  in  Gardner  v.  Heartt,  3  Denio,  234.  Nor  is  there  anything 
in  the  case  of  Peterson  v.  Clark,  15  John.  205,  which  conflicts  with 
the  principle  of  these  cases.  That  was  an  action  by  a  m.ortgagee 
in  the  usual  form  of  an  action  for  waste.  The  declaration  alleged 
seisin  in  the  plaintiff,  upon  which  the  defendant  took  issue.  There 
was  no  allegation  that  the  mortgagor  was  insolvent,  or  the  judg- 
ment as  a  security  impaired.  The  only  issue  to  be  passed  upon  was 
that  in  relation  to  the  seisin.  It  is  quite  clear  that  upon  such  an 
issue  the  mortgagee  must  fail.  Now  this  action  is  not  based  upon 
the  assumption  that  the  plaintiff's  land  has  been  injured,  but  that 
his  mortgage  as  a  security  has  been  impaired.    His  damages,  there- 


VAN    PELT   V.    MCGRAW  367 

fore,  would  be  limited  to  the  amount  of  injury  to  the  mortgage, 
however  great  the  injury  to  the  land  might  be.  It  could,  therefore, 
be  of  no  consequence  whether  the  injury  occurred  before  or  after 
forfeiture  of  the  mortgage.    The  action  is  clearly  maintainable. 

It  only  remains,  therefore,  to  be  considered  whether  there  was 
any  error  in  the  charge  of  the  court.  In  order  to  come  to  a  correct 
conclusion  upon  this  point,  it  becomes  necessary  to  examine  the 
exceptions  to  the  charge  in  connection  with  the  undisputed  testi- 
mony in  the  cause,  and  the  propositions  upon  which  the  court  were 
required  to  charge.  It  had  been  proved  that  the  defendants  knew 
of  the  mortgage,  that  the  mortgagors  were  insolvent,  and  that  the 
property  had  been  advertised  for  sale  by  virtue  of  the  mortgage. 
They  were  forbidden  to  remove  the  fences  and  timber,  for  the  reason 
that  the  security  would  thereby  be  impaired.  It  was  also  pi-oved 
that  the  value  of  the  mortgage  had  been  impaired  by  such  removal. 
Under  this  state  of  facts  the  defendants'  counsel  asked  the  court 
to  charge  the  jury  that  McGraw,  having  the  fee  of  the  land  and 
being  in  possession,  had  a  right  to  take  off  the  fences  and  timber; 
that  the  acts  being  lawful  could  not  be  deemed  to  have  been  done 
wrongfully  or  fraudulently.  The  court  charged  that  the  acts  were 
lawful  if  they  did  not  prejudice  the  plaintiff's  rights  or  impair  his 
security,  but  that  if  they  had  impaired  the  security,  knowing  the 
plaintiff's  lien,  they  were  liable.  As  an  answer  to  the  propositions 
of  the  defendants'  counsel,  the  charge  was  con-ect.  Acts  may  be 
harmless  in  themselves,  so  long  as  they  injure  no  one,  but  the 
consequences  of  acts  often  give  character  to  the  acts  themselves. 
It  is  upon  this  distinction  that  the  maxim  is  based,  sic  utere  tuo 
ut  alienum  non  Icedas.  As  I  have  before  observed,  the  hen  of  the 
plaintiff  upon  the  land  was  paramount  to  any  interest  which  the 
defendants  possessed  therein,  and  any  wilful  injury  of  that  lien 
by  them  was  a  violation  of  the  plaintiff's  rights,  for  which  an  action 
would  lie. 

The  defendants'  counsel  also  asked  the  court  to  charge  that,  the 
plaintiff  having  alleged  in  his  declaration  that  the  defendants 
did  the  acts  fraudulently  and  with  a  design  to  injure  the  plaintiff, 
he  was  bound  to  prove  the  allegations  by  evidence  other  than  the 
mere  act  of  removing  the  timber  for  the  emolument  of  the  defend- 
ants. The  court  refused  so  to  charge,  to  which  there  was  an  ex- 
ception. This  proposition  is  somewhat  obscure,  but  I  understand 
it  to  mean  that  the  plaintiff  should  prove  that  the  primary  motive 
of  the  defendants  was  to  cheat  the  plaintiff.  If  the  defendants 
knew  that  by  taking  off  the  timber  the  value  of  the  plaintiff's 


OoS  COMMON    LAW   RELATIONS 

mortgage  as  a  security  would  be  impaired,  they  would  be  legally 
chargeable  with  a  design  to  effect  that  object,  although  their  lead- 
ing motive  may  have  been  their  own  gain.  A  man  must  be  deemed 
to  design  the  necessary  consequences  of  his  acts.  If,  therefore,  he 
does  a  wrongful  act,  knowing  that  his  neighbor  will  be  thereby 
injured,  he  is  liable.  It  is  upon  this  principle  that  persons  are  often 
chargeable  with  the  intent  to  defraud  creditors,  or  to  commit  any 
other  fraud.  The  immediate  motive  is  oftentimes  self-interest,  but 
if  the  necessary  consequence  is  a  fraud  upon  his  neighbor,  the  actor 
is  legally  chargeable  with  a  design  to  effect  that  result.  Upon  the 
whole,  therefore,  although  the  charge  is  not  quite  so  expUcit  as 
it  should  be,  yet  taken  in  connection  with  the  propositions  pre- 
sented to  the  court,  I  think  it  was  substantially  correct.  The 
judgment  of  the  Supreme  Court  should  be  affirmed. 

Judgment  affirmed} 


WILSON  V.  MALTBY 

Court  of  Appelals  of  New  York,  1874 
(59  N.  Y.  126) 

Appeal  from  order  of  the  General  Term  of  the  Supreme  Court 
in  the  third  judicial  department,  affirming  an  order  of  Special 
Term  denying  a  motion  for  a  new  trial. 

This  action  was  brought  for  the  foreclosure  of  a  mortgage  made 
by  the  defendant,  George  Hubbard,  and  wife.  Plaintiff  sought  to 
recover  of  defendants,  C.  S.  Maltby  and  Thorn  J.  Houston,  in  case 
the  mortgaged  premises  should  not  realize,  upon  sale,  sufficient 
to  pay  the  mortgage  debt,  the  value  of  certain  wood  cut  upon  the 
mortgaged  premises,  the  complaint  alleging  fraud  and  collusion 
between  them  and  the  mortgagor. 

Hubbard  purchased  the  premises  in  question,  being  mostly  wood- 
land, of  plaintiff's  intestate,  in  1867,  subject  to  a  mortgage  thereon 
held  by  one  Knapp,  giving  the  mortgage  in  suit  for  part  of  the 
purchase-money.  In  1871  Hubbard  entered  into  a  contract  with 
Maltby  and  Houston,  by  which  he  sold  to  them  the  wood  grov/ing 
on  the  mortgaged  premises,  the  same  to  be  cut  by  the  purchaser, 
measured  and  paid  for  March  1,  1871.    Plaintiff,  learning  that  the 

^  Waterman  v.  Matteson,  4  R.  I.  Adams  v.  Corriston,  7  Minn.  45G 
539  (1857);  Jackson  v.  Turrell,  (1862),  contra.  Compare  Allison  v. 
39    N.    J.    L.    329    (1877),    accord.       McCune,  15  Oh.  Rep.  726  (1846). 


WILSON   V.    MALTBY  369 

wood  was  being  cut,  called  upon  Hubbard  and  threatened  to  stay 
the  cutting  by  injunction;  but,  upon  Hubbard  agreeing  to  pay 
over  the  money  received  for  the  wood  on  the  Knapp  mortgage,  he 
abandoned  the  intent.  On  the  27th  February,  1871,  after  the  wood 
was  all  cut,  plaintiff,  being  apprehensive  that  Hubbard  would  not 
do  as  he  agreed,  notified  the  purchasers  of  the  wood  of  his  lien,  of 
the  agreement  with  Hubbard,  and  communicated  to  them  his  fears, 
requesting  them  to  delay  paying  over  the  purchase-money;  this 
they  declined  to  do,  but  paid  the  same  to  Hubbard,  as  agreed,  on 
the  first  of  March.  Up  to  the  time  of  such  notice  they  had  no 
knowledge  that  there  was  any  mortgage  upon  the  premises,  and 
the  allegations  of  fraud  were  not  proved.  Hubbard  did  not  pay  it 
over,  as  agreed,  but  absconded  therewith.  The  mortgaged  prem- 
ises were  insufficient  to  pay  the  mortgages. 

Andrews,  J.  The  contract  for  the  purchase  of  the  wood  was 
made  by  the  defendants,  Maltby  and  Houston,  with  Hubbard,  the 
owner  of  the  land  from  which  it  was  taken.  Hubbard  was  in  pos- 
session of  the  premises,  and,  by  the  contract,  the  defendants  were 
to  cut  the  wood  and  to  pay  Hubbard  a  certain  price  per  cord  on 
the  1st  of  March,  1871.  The  defendants  did  not  know  until  on  or 
about  the  24th  of  February,  1871,  of  the  plaintiff's  mortgage, 
or  that  there  was  any  incumbrance  on  the  land.  The  wood  had 
then  been  cut,  and  nothing  remained  to  be  done  by  the  defendants 
under  the  contract,  except  the  payment  of  the  purchase-price. 
There  can  be  no  doubt  that  the  title  to  the  wood  vested  in  the  de- 
fendants upon  its  severance  from  the  land.  They  were  the  owners 
of  the  wood  by  purchase  from  the  owner  of  the  land,  and  were 
debtors  to  Hubbard  for  the  agreed  price.  The  fact  that  the  land 
was  mortgaged  when  the  contract  was  made,  or  when  the  wood 
was  cut,  did  not  affect  the  defendants'  title  to  the  severed  property, 
and  although  the  cutting  of  the  wood  impaired  the  security  of  the 
mortgage,  the  defendants  were  not  responsible  to  the  mortgagees 
for  the  resulting  injury,  unless  they  cut  the  wood  knowing  of  the 
lien  and  with  intent  to  injure  the  plaintiff  in  respect  to  his  security 
{Van  Pelt  v.  McGraw,  4  Comst.  110).  There  is  an  additional 
reason  in  this  case  why  the  plaintiff  is  precluded  from  treating  the 
act  of  the  defendants,  in  cutting  the  wood,  as  tortious,  or  as  a 
violation  of  his  rights  or  equities.  After  he  was  informed  that 
the  defendants  were  cutting  the  wood,  he  took  no  proceeding  to 
prevent  a  continuance  of  the  waste,  but  allowed  the  work  to  pro- 
ceed upon  the  promise  of  Hubbard  that  he  would  apply  the  money 


370  COMMON    LAW   RELATIONS 

he  should  receive  froi^  the  defendants  upon  the  Knapp  mortgage. 
The  promise  was  made  in  December,  and  it  was  not  until  the  fol- 
lowing February  that  he  notified  the  defendants  of  his  claim  on  the 
premises,  and  at  that  time  they  had  completed  the  work  under  the 
contract  with  Hubbard.  This  transaction  operated  as  a  Hcense  to 
Hubbard  to  sell  the  wood  to  the  defendants,  and  estopped  the  plain- 
tiff from  questioning  their  title.  The  question  then  comes  to  this: 
Could  the  defendants  lawfully  pay  their  debt  to  Hubbard,  against 
the  protest  of  the  plaintiff,  after  being  informed  that  Hubbard 
threatened  to  violate  his  agreement  to  apply  the  money  on  the 
prior  mortgage?  There  can  be  but  one  answer  to  this  question: 
The  defendants'  contract  was  with  Hubbard  alone,  and  their  debt 
was  owing  to  him.  The  promise  of  Hubbard  to  apply  the  amount 
he  should  receive  from  the  defendants  on  the  Knapp  mortgage 
did  not  make  the  plaintiff  the  assignee  of  the  debt.  It  gave  to  the 
plaintiff  at  most  a  right  as  against  Hubbard  to  intercept  the  psiy- 
ment  upon  proceedings  taken,  based  upon  evidence  that  he  threat- 
ened to  dispose  of  the  money  in  violation  of  his  agreement. 

We  express  no  opinion  whether  such  an  action  could  be  main- 
tained, but  we  think  it  is  clear  that,  until  prevented  by  the  order 
of  the  court,  the  defendants  could  lawfully  pay  the  debt  to  Hub- 
bard, and  that,  if  they  had  refused,  he  could  have  maintained  an 
action  to  recover  it.  The  defendants  were  neither  parties  nor 
privies  to  the  agreement  between  Hubbard  and  the  plaintiff,  as  to 
the  application  of  the  fund,  and  they  owed  no  legal  duty  to  the 
plaintiff  to  defer  the  payment  of  their  debt  at  his  request.  That 
agreement  recognized  Hubbard's  right  to  receive  the  payment,  and 
no  legal  proceedings  having  been  taken  to  prevent  it,  the  payment 
to  him  was  a  valid  discharge  of  their  obligation.  In  view  of  the 
finding  of  the  jury,  it  cannot  be  claimed  that  they  colluded  with 
Hubbard  in  the  transaction,  or  misled  the  plaintiff,  or  induced  him 
to  institute  legal  proceedings  against  Hubbard  upon  the  promise 
to  retain  the  money  until  an  injunction  should  be  procured. 

The  judgment  should  be  affirmed. 

All  concur. 

Judgment  affirmed} 

1  Augier  v.  Agnew,  98  Pa.  St.  587  (1881),  accord. 


SEARLE    V.    SAWYER  371 

SEARLE   V.   SAWYER 

Supreme  Judicial  Court  of  Massachusetts,  1879 

(127  Mass.  491) 

Morton,  J.  This  is  an  action  of  tort  for  the  conversion  of  a 
quantity  of  wood  and  timber. 

It  appeared  at  the  trial  that  one  Warren,  being  the  owner  of 
a  lot  of  wood-land,  mortgaged  it  to  the  plaintiff's  testator;  and 
that,  after  the  condition  of  the  mortgage  was  broken,  but  before 
the  mortgagee  had  taken  possession,  Warren  cut  the  wood  and 
timber  in  question  and  sold  it  to  the  defendant.  The  presiding 
justice  of  the  Superior  Court  ruled  that,  "if  the  defendant  bought 
of  the  mortgagor  wood  and  timber  cut  from  the  mortgaged  prem- 
ises, and  exercised  such  acts  of  ownership  over  the  same  as  would 
amount  to  a  conversion,  then  he  would  be  liable  to  the  mortgagee 
for  the  value  of  the  same,  without  any  previous  demand,  and  al- 
though he  bought  the  same  in  good  faith  and  without  any  notice 
or  knowledge  of  any  claim  upon  the  same."  To  this  ruling  the 
defendant  excepted. 

Upon  the  question  whether,  if  a  mortgagor  commits  waste  by 
removing  buildings,  wood,  timber,  fixtures  or  other  parts  of  the 
realty,  the  mortgagee  out  of  possession  can  follow  the  property 
after  it  has  been  severed,  and  recover  it  or  its  value,  there  have 
been  conflicting  decisions  in  different  jurisdictions.  In  New  York 
and  Connecticut,  it  has  been  held  that  a  mortgagee  out  of  posses- 
sion cannot  maintain  an  action  at  law  for  waste  committed  by  the 
mortgagor;  and  that  he  has  no  property  in  wood  or  timber  cut  and 
removed,  so  as  to  enable  him  to  maintain  trover  for  its  conversion 
{Peterson  v.  Clark,  15  Johns.  205;  Cooper  v.  Davis,  15  Conn.  556). 
On  the  other  hand,  it  has  been  held  in  Maine,  New  Hampshire, 
Vermont  and  Rhode  Island,  that  timber,  if  wrongfully  cut  and 
removed  by  the  mortgagor,  remains  the  property  of  the  mortgagee 
out  of  possession,  and  he  may  recover  its  value  of  the  mortgagor  or 
a  purchaser  from  him  {Gore  v.  Jenness,  19  Maine,  53;  Frothing- 
ham  V.  McKusick,  24  Maine,  403;  Smith  v.  Moore,  11  N.  H.  55; 
Langdon  v.  Paul,  22  Vt.  205;  Waterman  v.  Matteson,  4  R.  I.  539). 

We  are  not  aware  that  this  precise  question  has  been  adjudicated 
in  this  State,  but  the  previous  decisions  of  this  court  in  regard  to 
the  rights  of  mortgagees  and  the  nature  of  their  interests  in  the 
mortgaged  estate,  are  such  as  to  lead  to  the  conclusion  that  a  mort- 


372  COMMON    LAW   RELATIONS 

gagee  out  of  possession  is  entitled  to  timber,  fixtures  and  other 
parts  of  the  realty  wrongfully  severed,  and  may  recover  them,  or 
their  value,  if  a  conversion  is  proved.  In  Fay  v.  Brewer,  3  Pick. 
203,  it  was  held  that  a  mortgagee  in  possession,  but  before  fore- 
closure, could  maintain  an  action  on  the  case  in  the  nature  of 
waste  against  a  tenant  for  life,  for  cutting  down  trees  on  the 
mortgaged  land  before  he  took  possession,  and  the  court  in  the 
opinion  comment  on  the  case  of  Peterson  v.  Clark,  15  Johns.  205, 
as  not  being  of  authority  here,  "since  the  law  of  mortgage  in  New 
York  is  so  different  from  our  own."  In  Page  v.  Robinson,  10  Cush. 
99,  it  was  held  that  a  mortgagee,  after  condition  broken,  though 
not  in  actual  possession,  could  maintain  trespass  against  the  mort- 
gagor, or  one  acting  under  his  authority,  for  cutting  and  carrying 
away  timber-trees  from  the  mortgaged  premises,  without  license 
express  or  implied  from  the  mortgagee.  In  Cole  v.  Stewart,  11 
Cush.  181,  it  was  held  that  an  action  at  law  would  lie  by  a  mort- 
gagee not  in  possession  against  one  who,  under  authority  from  the 
mortgagor,  removed  a  building  from  the  mortgaged  land.  In 
Butler  V.  Page,  7  Met.  40,  a  second  mortgagee  sold  to  the  defendant 
a  building  standing  on  the  mortgaged  land,  who  took  it  down  and 
removed  the  materials.  It  was  held  that  the  administrator  of  the 
mortgagor  could  not  maintain  trover  for  the  materials,  as  the  fee 
of  the  mortgaged  premises  was  in  the  mortgagees,  and  the  removal 
of  the  building  vested  no  property  in  the  materials  in  the  mort- 
gagor's representative. 

In  Wibnarth  v.  Bancroft,  10  Allen,  348,  a  house  standing  on 
mortgaged  land  was  partially  destroyed  by  fire.  The  mortgagor 
sold  to  the  defendant  such  materials  as  were  saved,  and  brought 
this  action  to  recover  the  price  agreed  to  be  paid.  It  was  held  that 
the  fact  that  the  mortgagee  had  claimed  the  agreed  price,  and 
forbidden  the  defendant  to  pay  it  to  the  mortgagor,  was  a  good 
defence.  The  opinion  is  put  upon  the  ground  that  the  partial 
burning  of  the  house,  and  the  consequent  severance  of  the  unburnt 
materials,  "did  not  terminate  or  affect  the  mortgagee's  interest 
in  the  fixtures."  So  it  has  been  held  in  several  cases  that  a  mort- 
gagee out  of  possession  may  maintain  an  action  at  law  against  the 
mortgagor  or  a  stranger  for  removing  fixtures  and  thus  impairing 
the  security  (Gooding  v.  Shea,  103  Mass.  360;  Byrom  v.  Chapin, 
113  Mass.  308;  King  v.  Bangs,  120  Mass.  514). 

The  fair  result  of  these  authorities  is  that,  under  our  law,  a 
mortgagee  is  so  far  the  owner  in  fee  of  the  mortgaged  estate  that, 
if  any  part  of  it  is  wrongfully  severed  and  converted  into  personalty 


SEARLE    V.    SAWYER  373 

by  the  mortgagor,  his  interest  is  not  divested,  but  he  remains  the 
owner  of  the  personalty,  and  may  follow  it  and  recover  it  or  its 
value  of  any  one  who  has  converted  it  to  his  own  use  (Stanley  v. 
Gaylord,  1  Cush.  536;  Riley  v.  Boston  Water  Power  Co.,  11  Cush. 
11).  But  the  severance  must  be  wrongful,  and,  where  it  is  made  by 
the  mortgagor  or  one  acting  under  his  authority,  whether  it  is 
wrongful  or  not  will  depend  upon  the  question  whether  a  license 
to  do  the  act  has  been  expressly  given,  or  is  fairly  to  be  implied 
from  the  relations  of  the  parties.  The  true  rule  is  as  stated  in 
Smith  V.  Moore,  11  N.  H.  55,  and  approved  in  Page  v.  Robinson, 
10  Cush.  99,  that  acts  of  the  mortgagor  in  cutting  wood  and 
timber,  or  otherwise  severing  parts  of  the  realty,  are  not  wrongful 
when  from  the  circumstances  of  the  case  the  assent  of  the  mort- 
gagee may  be  reasonably  presumed.  The  relation  between  a 
mortgagor  and  mortgagee  is  a  very  peculiar  one.  The  mortgagee 
takes  an  estate  in  fee,  but  the  sole  purpose  of  the  mortgage  is  to 
secure  his  debt.  Usually  in  this  State  the  mortgage  contains  a  pro- 
vision that  the  mortgagor  may  retain  possession  until  condition 
broken.  The  object  of  this  is  that  the  mortgagor  may  have  the 
use  and  enjoyment  of  his  property,  and  it  implies  a  Ucense  to  use  it 
in  the  same  manner  as  such  property  is  ordinarily  used  and  as  will 
not  unreasonably  impair  the  adequacy  of  the  security.  If  a  mort- 
gage be  of  a  dwelling-house,  the  mortgagor  may  do  many  acts, 
such  as  acts  of  repair  or  alteration,  which  may  involve  the  removal 
of  parts  of  the  realty,  which  would  not  be  wrongful  because  within 
the  license  implied  from  the  relations  of  the  parties.  If  a  farmer 
mortgages  the  whole  or  a  part  of  his  farm,  with  a  clause  permitting 
him  to  retain  possession,  as  was  probably  the  case  at  bar,  it  is 
within  the  contemplation  of  the  parties  that  he  is  to  carry  on  his 
farm  in  the  usual  manner,  and  a  license  to  do  so  is  implied.  In 
such  case,  it  is  clear  that  he  is  entitled  to  take  the  annual  crops,  and 
wood  for  fuel  (Woodward  v.  Pickett,  8  Gray,  617).  And  we  do 
not  think  that  the  implied  license  is  necessarily  limited  to  the 
annual  crops,  but  that  it  extends  to  any  acts  of  carrying  on  the 
farm  which  are  usual  and  proper  in  the  course  of  good  husbandry. 
If,  in  carrying  on  similar  farms,  it  is  usual  and  is  good  husbandry 
to  cut  and  carry  to  market  wood  and  timber  to  a  limited  extent, 
a  license  to  do  this  might  be  implied  from  the  relation  of  the  par- 
ties. 

The  bill  of  exceptions  furnishes  us  with  so  meagre  and  imperfect 
a  history  of  the  case,  that  we  are  unable  to  say  how  far  these  con- 
siderations are  applicable  in  the  case  at  bar.    But  the  ruUng  of  the 


374  COMMON   LAW    RELATIONS 

presiding  justice  seems  to  have  been  general,  that  the  defendant: 
would  be  liable  if  the  wood  and  timber  were  cut  from  the  mort- 
gaged premises,  and  to  have  excluded  the  question  whether,  under 
the  circumstances  of  the  case,  the  assent  of  the  mortgagee  thereto 
could  fairly  be  presumed  by  the  jury.  We  are  of  opinion  that  this 
question  should  be  submitted  to  the  jury,  and,  therefore,  that  a  new 
trial  must  be  ordered. 

Exceptions  sustained. 


CHAPTER  II 

EQUITY  RELATIONS 

Section  I. — Once  a  Mortgage,  Always  a  Mortgage 

HOWARD  V.  HARRIS 
High  Court  of  Chancery,  1681 

(1  Vern.  33) 

Howard  mortgages  land,  and  the  proviso  for  redemption  was 
thus:  provided  that  I  myself,  or  the  heirs  males  of  my  body  may 
redeem.^  The  question  was,  whether  his  assignee  should  redeem 
it?  and  it  was  decreed  he  should;  for  if  once  a  mortgage,  always 
a  mortgage.^ 

In  this  case  part  of  the  mortgaged  estate  happened  to  be  in 
Mrs.  Howard's  jointure,  and  it  was  admitted  that  she  thereby  was 
entitled  to  a  redemption  of  the  whole  mortgage;  and  so  it  was  ad- 
judged in  the  case  of  Browne  and  Edwards.^ 

BATTY  V.  SNOOK 

Supreme  Court  of  Michigan,  1858 

(5  Mich.  231) 

Appeal  from  Macomb  Circuit  in  Chancery.'* 

Manning,  J.:  The  bill  in  this  case  is  very  inartificially  drawn; 
so  much  so  that,  on  first  reading  it  over,  one  is  at  a  loss  to  know 

^  The  words  of  the  proviso  are  part  of  the  mortgagor  that  no  person 
"that  if  he  or  the  heirs  of  his  body  should  have  the  power  or  benefit  of 
paid  the  £565,  the  mortgage  money,  redemption,  but  only  himself  and 
and  interest  at  two  years'  end,  the  the  heirs  of  his  body.  On  the  effect 
conveyance  to  be  void."  Then  a  of  such  a  covenant,  vide  Newcomb 
further  sum  of  money  was  borrowed  v.  Bonham,  ante,  p.  7,  note.  In  the 
by  Howard ;  and  the  above-mentioned  principal  case  a  plea  as  to  the  re- 
proviso  was  released  by  deed,  and  demption  was  put  in,  but  over- 
another  proviso   contained   in   such  ruled. — Rep. 

last-mentioned  deed  "that  if  he  or  ^  Cf.  Neivcomb  v.  Bonham,  1  Vem. 

the  heirs  of  his  body  begotten  should,  7,  214,  232  (1681,  1683,  1684). 
at  a  given  day  therein  mentioned,  ^  Reg.  Lib.  1681,  A.  fol.  260. 

pay  £1,000,  then,"  &c.    And  in  this  ^  The  facts  are  sufficiently  stated 

case  there  was  a  covenant  on  the  in  the  opinion. 

375 


376  EQUITY   RELATIONS 

whether  it  is  for  the  redemption  of  mortgaged  premises,  for  the 
specific  performance  of  a  contract,  or  to  set  aside  certain  trans- 
actions for  fraud.  We  mention  this,  as  the  merits  of  a  case  may 
sometimes  be  overlooked  or  lost  sight  of  by  reason  of  the  rubbish 
under  which  it  is  concealed.  We  think,  however,  there  are  sufficient 
facts  stated,  when  separated  from  the  irrelevant  or  immaterial 
matter,  to  enable  us  to  treat  it  as  a  bill  to  have  a  certain  deed 
and  contract  relative  to  real  estate  declared  a  mortgage,  and 
for  redemption  of  the  mortgaged  premises.  As  such  we  shall 
consider  it. 

Complainant  purchased  of  the  defendant,  Warner,  in  1853  a  lot  in 
the  village  of  Mt.  Clemens,  on  which  there  was  a  saw  mill.  On 
the  5th  of  April,  1854,  the  premises  were  deeded  by  Warner  to 
complainant,  who  at  the  same  time,  to  secure  a  part  of  the  purchase- 
money,  mortgaged  the  lot  to  AVarner  for  $2331.26,  payable  with 
interest— $500  on  the  18th  November,  1854;  $500  in  one  year 
thereafter;  the  like  sum  in  two  years;  and  the  balance,  being 
S831.26,  in  three  years.  The  complainant  soon  thereafter,  and  in 
less  than  a  year,  became  embarrassed  in  his  business,  and  was  un- 
able to  pay  Warner  and  his  other  creditors  what  he  was  owing 
them.  He  was  indebted  to  Warner  in  a  large  sum  over  and  above 
the  mortgage  debt,  and  Warner,  being  aware  of  his  pecuniary 
diflriculties,  was  solicitous  to  get  his  debt  secured— that  is,  that 
portion  of  it  not  included  in  the  mortgage;  and  went  twice  from 
Saginaw,  where  he  was  residing,  to  Mt.  Clemens,  to  see  if  he  could 
not  make  some  arrangement  with  complainant  for  that  purpose. 
On  his  last  visit  a  settlement  took  place  between  the  parties,  from 
which  it  appears  complainant  turned  out  property  in  part  payment 
of  what  he  was  owing  him,  leaving  a  balance  still  due  Warner  of 
$2000.  Warner,  to  effect  the  settlement,  was  induced  to  take 
the  property  at  more  than  its  value.  In  pursuance  of  this 
settlement,,  the  mortgage  from  complainant  to  Warner  was 
cancelled,  and  the  mortgaged  premises  were  deeded  back  to 
Warner  by  complainant.  This  deed  bears  date  on  the  6th  Feb- 
ruary, 1855. 

There  is  also  a  contract  between  the  parties  for  the  repurchase 
of  the  premises  by  complainant.  This  contract  bears  date  Febru- 
ary 7th— the  day  after  the  deed.  Were  the  two  instruments  parts 
of  one  and  the  same  transaction,  or  were  they  separate  and 
distinct  transactions?  The  difference  in  their  dates  favors  the 
latter  view,  but  it  is  by  no  means  conclusive.  The  bill  alleges 
both  had  their  origin  in  the  settlement,  and  that  they  are  parts 


BATTY    V.    SNOOK  377 

of  the  same  transaction,  and  were  intended  as  security  for  the  pay- 
ment of  the  $2000.  The  answer,  instead  of  denying  this  in  clear 
and  explicit  terms,  as  it  should  have  done  if  it  was  not  the  ti-uth, 
we  think  admits  it.  Referring  to  Warner's  second  visit,  the  answer 
says  he  (Warner)  was  about  to  return  home  when  complainant 
stated  to  him  he  had  a  horse  and  buggy  and  a  certain  promissorj'^ 
note  he  would  let  him  have  if  "he  would  release  all  complainant 
was  owing  him  aside  from  the  mortgage  and  a  part  of  the  latter, 
and  extend  the  payment  due  on  the  mortgage  to  the  1st  of  Decem- 
ber, 1855."  The  answer  then  proceeds:  "That  this  defendant, 
thinking  he  could  do  no  better,  then  and  there  agreed  to  take  said 
note  and  horse  and  buggy  and  a  deed  of  said  saw-mill  lot  and  mill, 
and  entered  into  contract  A"  (the  contract  of  7th  February,  1855, 
already  spoken  of),  "with  the  design  and  express  understanding 
on  the  part  of  said  complainant  and  this  defendant,  if  he  (the  said 
complainant)  failed  in  any  particular  in  complying  with  said  con- 
tract A,  that  he  (the  said  complainant)  should  have  no  right  at 
law  or  in  equity  to  the  said  lands  and  saw  mill;  and  said  contract 
A  was  particularly  and  expressly  conditioned  to  be  the  same  as  an 
original  contract  for  the  conveyance  of  land,  in  which  time  should 
be  material,  and  every  requisite  on  the  part  of  said  complainant 
to  be  done  and  performed  should  be  by  him  literally  complied 
with." 

Here  is  an  admission  of  complainant's  case  by  the  answer.  It 
admits  the  deed  and  contract  are  parts  of  one  transaction,  and  that 
the  object  of  them  was  to  secure  the  balance  of  complainant's  debt 
to  Warner.  It  also  shows  that  if  complainant  failed  to  pay  promptly 
when  the  debt  became  due,  he  was  to  forfeit  all  right  at  law  and  in 
equity  to  the  premises  he  had  conveyed  to  Warner,  and  that  to 
effect  this  object  it  was  agreed  the  contract  should  be  considered 
and  treated  as  an  original  contract  for  the  purchase  of  the  premises, 
in  which  time  should  be  material.  When  the  arrangement  was 
entered  into  there  was  but  one  payment  due  on  complainant's 
mortgage  of  the  5th  April,  1854,  and  one  other  that  would  become 
due  before  the  1st  December,  1855,  when  complainant  was  required 
to  pay  $500  on  the  contract  of  7th  February,  which  also  provided 
for  the  payment  of  the  remaining  $1500  in  one  j^ear  thereafter — 
nearly  a  year  before  the  last  installment  would  have  fallen  due  on 
the  mortgage  given  in  1854.  The  contract  contained  a  covenant 
for  the  payment  of  the  $2000,  and  by  it  complainant  was  to  retain 
possession  of  the  premises  and  was  not  to  remove  any  buildings  or 
machinery. 


378  EQUITY   RELATIONS 

Other  facts  might  be  mentioned  to  show  the  mortgage  of  '54  was 
canceled,  and  the  deed  and  contract  of  the  6th  and  7th  February, 
'55,  were  made  to  secure  the  $2000  complainant  was  owing  Warner; 
but  it  is  unnecessary  to  notice  them  or  to  go  into  the  proofs  to 
establish  what  is  admitted  by  the  answer. 

The  only  remaining  question  is,  whether  the  case  is  one  proper 
for  the  interposition  of  a  court  of  equity. 

Once  a  mortgage,  always  a  mortgage,  may  be  regarded  as  a 
maxim  of  the  court.  Equity  is  jealous  of  all  contracts  between 
mortgagor  and  mortgagee  by  which  the  equity  of  redemption  is  to 
be  shortened  or  cut  off.  The  mortgagor  may  release  the  equity 
of  redemption  to  the  mortgagee  for  a  good  and  valuable  considera- 
tion when  done  voluntarily,  and  there  is  no  fraud  and  no  undue 
influence  brought  to  bear  upon  him  for  that  purpose  by  the  cred- 
itor. But  it  cannot  be  done  by  a  cotemporaneous  or  subsequent  ^ 
executory  contract  by  which  the  equity  of  redemption  is  to  be 
forfeited  if  the  mortgage  debt  is  not  paid  on  the  day  stated  in  such 
contract  without  an  abandonment  by  the  court  of  those  equitable 
principles  it  has  ever  acted  on  in  relieving  against  penalties  and 
forfeitures.  What  we  now  call  a  mortgage  was  at  common  law  a 
conditional  conveyance  of  the  land,  by  which  the  title  of  the  vendee 
was  to  terminate  or  became  absolute  on  the  performance  or  non- 
performance of  the  condition  of  the  grant  by  the  vendor  at  the  day. 
When  such  conveyance  was  made  to  secure  a  debt,  or  for  the  per- 
formance of  some  other  act  by  the  vendor,  equity  took  cognizance 
of  the  transaction  and  declared  the  conveyance  a  security  merely 
for  the  payment  of  the  debt  or  doing  of  the  act,  and  on  the  perform- 
ance thereof  by  the  vendor,  after  the  day  had  elapsed  and  the  es- 
tate had  become  absolute,  would  decree  a  reconveyance  of  the 
premises.  To  allow  the  equity  of  redemption  to  be  cut  off  by  a 
forfeiture  of  it  in  a  separate  contract  would  be  a  revival  of  the  com- 
mon law  doctrine,  using  for  that  purpose  two  instruments  instead 
of  one  to  effect  the  object. 

Snook,  the  other  defendant,  to  whom  Warner  conveyed  on  the 
22d  December,  1855,  purchased  with  full  knowledge  of  complain- 
ant's equities.  He  took  possession  soon  after,  and  has  been  in 
possession  ever  since. 

The  decree  of  the  court  below,  dismissing  the  complainant's  bill 
with  costs,  must  be  reversed  and  a  decree  be  entered  declaring  the 
deed  and  contract  one  transaction  and  to  be  a  mortgage,  and  that 

1  Compare  Wynkoop  v.  Cowing,  21  111.  570  (1859). 


MOONEY   V.    BYRNE  379 

complainant  is  entitled  to  redeem;  and  the  transcript  must  be 
remitted  to  the  court  below  for  further  proceedings. 
The  other  justices  concurred.^ 


MOONEY  V.   BYRNE 

Court  of  Appeals  of  New  York,  1900 

(163  N.  Y.  86) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Svi- 
preme  Court  in  the  second  judicial  department,  entered  March  20, 
1897,  affirming  a  judgment  in  favor  of  defendants,  entered  upon 
a  dismissal  of  the  complaint  by  the  court  on  trial  at  Special  Term. 

The  nature  of  the  action  and  the  facts,  so  far  as  material,  are 
stated  in  the  opinion. 

Vann,  J.  The  case  made  by  the  complaint  was  that  of  a  mort- 
gagor with  a  right  to  redeem  from  a  mortgagee  or  his  devisees  in] 
possession.  The  defendants  denied  that  there  was  any  mortgage,, 
alleged  an  absolute  conveyance  from  the  plaintiff  to  one  Ower 
Byrne,  and  a  subsequent  conveyance  from  the  latter  to  a  bona  fid^ 
purchaser.  They  also  pleaded  the  Statute  of  Limitations  and 
specified  the  period  of  six  and  ten  years  as  the  limit  exceeded  by  the 
plaintiff  in  bringing  her  action. 

The  facts  agreed  upon  by  the  parties  and  admitted  by  the  plead- 
ings are  in  substance  as  follows:  On  the  14th  of  August,  1878,  the 
plaintiff  owned  and  was  in  possession  of  a  parcel  of  land  in  the 
city  of  New  York  worth  $10,000  and  upwards,  and  at  the  same 
time  she  was  indebted  to  Owen  Byrne  in  the  sum  of  about  $3000, 
secured  by  three  mortgages  on  said  premises,  which  were  under 
process  of  foreclosure.  In  order  to  secure  the  payment  of  this 
indebtedness  she  conveyed  the  land  to  said  Byrne  at  his  request  by 
a  deed  dated  on  the  day  last  named  and  duly  recorded.  "The 
said  deed  was  given  as  security"  and  for  no  other  purpose.  It 
contained  full  covenants,  subject  to  said  mortgages,  which,  as  it 
was  declared,  "shall  not  merge  in  the  fee,  but  shall  remain  valid 
and  subsisting  liens."  Said  Byrne  at  the  same  time  gave  back  a 
defeasance  of  even  date  whereby  he  agreed  to  reconvey  to  the  plain- 
tiff upon  the  payment  to  him  within  one  year  of  said  indebtedness 

1  Cf.  Pritchard  v.  Elton,  38  Conn.       434  (1871);  Austin  v.  Bradley,  2  Day 

(Conn.),  466  (1807). 


380  EQUITY    RELATIONS 

certain  advances  which  he  agreed  to  make  for  her  benefit  and  the 
costs  of  the  foreclosure  proceedings.  It  was  stipulated  that  she 
should  be  relieved  from  personal  liability  on  the  bonds  and  that  no 
judgment  for  deficiency  should  "be  claimed  or  entered  against  her 
in  any  action  that  may  be  taken  upon  said  bonds  or  mortgages  so 
long  as  she  and  all  persons  claiming  under  her  shall  not  dispute 
or  contest  the  title  of  the"  said  Byrne  "or  his  assigns  to  said  mort- 
gaged premises  or  the  amounts  due  him  on  said  mortgages.  ..." 
Said  instrument  also  provided  "that  as  to  the  agreement  by  the"" 
said  Byrne  "to  reconvey  said  premises,  time  is  of  the  essence 
thereof,  and,  further,  that  this  instrument  shall  not  be  recorded  by 
or  on  behalf  of  the"  plaintiff,  "and  that  for  a  violation  of  this 
provision  this  agreement,  so  far  as  the  same  provides  for  such  re- 
conveyance, shall  thereupon  become  utterly  null  and  void."  The 
defeasance  was  never  recorded. 

Said  Byrne  at  once  took  possession  of  the  premises  and  remained 
in  possession  thereof  until  the  13th  of  June,  1881,  when  he  conveyed 
to  one  Walker  by  a  deed  duly  recorded,  but  "said  conveyance  was 
made  without  the  consent  of  the  plaintiff,  who  had  no  knowledge 
of  it  until  this  action  was  begun"  on  the  7th  of  March,  1895.  Said 
Byrne  died  on  the  11th  of  January,  1889,  leaving  a  will  by  which 
he  gave  all  his  property,  real  and  personal,  to  the  defendants.  His 
executor  accounted  and  has  been  discharged,  and  the  property  of 
the  testator  has  been  delivered  to  the  defendants.  The  plaintiff 
claimed  that  the  rents  and  profits  of  the  premises  received  by  Byrne 
amounted  to  more  than  the  principal  and  interest  of  the  debt 
secured.  She  alleged  in  her  complaint  that  if  Byrne  had  conveyed 
the  premises  to  any  one,  such  conveyance  was  made  without  her 
knowledge  or  consent.  She  demanded  an  accounting  as  to  the 
amount  due  from  her,  and  that  she  might  "be  at  liberty  to  redeem 
said  mortgaged  premises  upon  payment  of  whatever  may  upon  such 
accounting  be  found  due,  which  this  plaintiff  hereby  offers  to  pay," 
and  that  the  defendants  be  compelled  to  convey  said  premises  to 
her.  She  also  demanded  alternative  and  general  relief.  Said 
Walker,  who  still  owns  the  premises,  was  not  made  a  party  to  the 
action.  The  trial  judge  dismissed  the  complaint  upon  the  ground 
that  "the  Statute  of  Limitations  is  a  conclusive  defense,"  and  the 
Appellate  Division  affirmed,  on  an  opinion  rendered  in  overruling 
a  demurrer  to  the  answer,  when  the  case  was  in  the  first  depart- 
ment (15  App.  Div.  624;  1  id.  316). 

The  facts  agreed  upon  show  that  there  was  a  mortgage;  for  a 
deed,  although  absolute  on  its  face,  when  given  as  security  only,  is 


MOONEY    V.    BYRNE  381 

a  mortgage  by  operation  of  law  {Horn  v.  Keteltas,  46  N.  Y.  605; 
Meehan  v.  Forrester,  52  N,  Y.  277;  Odell  v.  Montross,  68  N.  Y.  499; 
Barry  v.  Hamburg -Bremen  Fire  Ins.  Co.,  110  N.  Y.  1,  5;  Kraemer 
V.  Adelsberger,  122  N.  Y.  467;  Macauley  v.  Smith,  132  N.  Y.  524; 
15  Am.  &  Eng.  Encyc.  791;  1  R.  S.  756,  sec.  3;  Laws  1896,  ch.  547, 
sec.  269).  While  there  was  no  covenant  to  pay  the  debt,  none  was 
needed,  for  the  property  was  worth  much  more  than  the  amount 
of  the  indebtedness,  and  the  mortgagee  could  safely  confine  his 
remedy  to  the  land  (1  R.  S.  739).  The  absence  of  such  a  covenant, 
the  conditional  release  of  any  claim  for  deficiency,  and  the  agree- 
ment not  to  record  the  defeasance,  are  of  no  importance  in  view 
of  the  express  admission  that  the  deed  was  given  as  security.  The 
deed  and  defeasance  were  executed  at  the  same  time,  and  as  the 
latter  in  express  terms  refers  to  the  former,  they  must  be  construed 
the  same  as  if  both  were  embodied  in  a  single  instrument.  When 
read  together  in  the  light  of  the  admission  that  the  object  was  to 
secure  a  debt,  it  is  clear  that  the  transaction  was  not  a  conditional 
sale,  and  that  the  covenant  making  time  the  essence  of  the  contract 
to  reconvey  has  no  more  effect  than  if  it  occurred  in  the  defeasance 
clause  of  an  ordinary  mortgage.  An  instrument  executed  simply  as 
security  cannot  be  turned  into  a  conditional  sale  by  the  form  of 
a  covenant  to  reconvey,  and  even  if  there  was  a  doubt  as  to  the 
meaning,  the  contract  would  be  regarded  as  a  mortgage,  so  as  to 
avoid  a  forfeiture,  which  the  law  abhors  (Matthews  v.  Sheehan, 
69  N.  Y.  585).  As  was  said  by  the  Supreme  Court  of  the  United 
States:  "It  is  an  established  doctrine  that  a  court  of  equity  will 
treat  a  deed,  absolute  in  form,  as  a  mortgage,  when  it  is  executed 
as  security  for  a  loan  of  money.  That  court  looks  beyond  the  terms 
of  the  instrument  to  the  real  transaction,  and  when  it  is  shown  to 
be  one  of  security,  and  not  of  sale,  it  will  give  effect  to  the  actual 
contract  of  the  parties.  ...  It  is  also  an  established  doctrine  that 
an  equity  of  redemption  is  inseparably  connected  with  a  mortgage; 
that  is  to  say,  so  long  as  the  instrument  is  one  of  security,  the 
borrower  has,  in  a  court  of  equity,  a  right  to  redeem  the  property 
upon  payment  of  the  loan.  This  right  cannot  be  waived  or  aban- 
doned by  any  stipulation  of  the  parties  made  at  the  time,  even  if 
embodied  in  the  mortgage.  This  is  a  doctrine  from  which  a  court 
of  equity  never  deviates  "  (Peugh  v.  Davis,  96  U.  S.  332,  336). 

The  right  to  redeem  is  an  essential  part  of  a  mortgage,  read  in 
by  the  law  if  not  inserted  by  the  parties.  Although  many  attempts 
have  been  made,  no  form  of  covenant  has  yet  been  devised  that  will 
cut  off  the  right  of  a  mortgagor  to  redeem,  even  after  the  law  day 


382  EQUITY   RELATIONS 

\lias  long  passed  by  (Clark  v.  Henry,  2  Cow.  324,  331;  Jones  on 
Mortgages,  §  1039).  Even  an  express  stipulation  not  to  redeem 
does  not  prevent  redemption,  because  the  right  is  created  by  law. 
For  the  same  reason  an  express  power  to  sell  at  private  sale  after 
default  is  of  no  effect.  "If,"  said  Chancellor  Kent,  "a  freehold 
estate  be  held  by  way  of  mortgage  for  a  debt,  then  it  may  be  laid 
down  as  an  invariable  rule  that  the  creditor  must  first  obtain  a 
decree  for  a  sale  under  a  bill  of  foreclosure.  There  never  was  an 
instance  in  which  the  creditor,  holding  land  in  pledge,  was  allowed 
to  sell  at  his  own  will  and  pleasure.  It  would  open  the  door  to  the 
most  shameful  imposition  and  abuse"  (Hart  v.  Ten  Eyck,  2  Johns. 
Ch.  62,  100).  The  utmost  effect  claimed  for  the  provision  that  the 
defeasance  was  not  to  be  recorded  is  that  it  was  a  consent  to  a  pri- 
vate sale  after  default.  As  was  well  said  by  a  recent  writer:  "If 
the  instrument  is  in  its  essence  a  mortgage,  the  parties  cannot  by 
any  stipulation,  however  express  and  positive,  render  it  anything 
but  a  mortgage,  or  deprive  it  of  the  essential  attributes  belonging  to 
a  mortgage  in  equity.  The  debtor  or  mortgagor  cannot,  in  the 
inception  of  the  instrument,  as  a  part  of  or  collateral  to  its  execu- 
tion, in  any  manner  deprive  himself  of  his  equitable  right  to  come 
in  after  a  default  in  paying  the  money  at  the  stipulated  time,  and 
to  pay  the  debt  and  interest,  and  thereby  to  redeem  the  land  from 
the  lien  and  incumbrance  of  the  mortgage;  the  equitable  right  of 
redemption,  after  a  default,  is  preserved,  remains  in  full  force,  and 
will  be  protected  and  enforced  by  a  court  of  equity,  no  matter  what 

I  stipulations  the  parties  may  have  made  in  the  original  transaction 
purporting  to  cut  off  this  right"  (3  Pomeroy's  Eq.  Jur.,  §  1193). 
So  Mr.  Thomas  says  that  "it  was  a  bold  but  necessary  decision  of 
equity  that  a  debtor  could  not,  even  by  the  most  solemn  engage- 
ments entered  into  at  the  time  of  the  loan,  preclude  himself  from 
his  right  to  redeem  "  (Thomas  on  Mortgages,  §  9). 

To  prevent  undue  advantage  through  inadequacy  of  considera- 
tion, either  with  or  without  an  opportunity  to  repurchase,  the 
courts  are  steadfast  in  holding  that  a  conveyance,  whatever  its 
form,  if  in  fact  given  to  secure  a  debt,  is  neither  an  absolute  nor  a 
conditional  sale,  but  a  mortgage,  and  that  the  grantor  and  grantee 
have  merely  the  rights  and  are  subject  only  to  the  obligations  of 
mortgagor  and  mortgagee  (Lawrence  v.  Farmers'  L.  &  T.  Co., 
13  N.  Y.  200).  In  the  case  before  us  there  was  no  purchase  of  the 
land  by  Owen  Byrne,  for  the  existing  relation  of  debtor  and  cred- 
itor between  himself  and  the  plaintiff  was  not  ended,  but  was  con- 
tinued by  a  contract  intended  to  secure  the  old  debt,  together 


MOONEY    V.    BYRNE  383 

with  some  further  advances.  He  had  a  lien  on,  but  no  estate  in, 
the  land  (Thorn  v.  Sutherland,  123  N.  Y.  236;  Hubbell  v.  Moulson, 
53  N.  Y.  225,  228).  She  had  the  right  to  redeem  and  he  the  right 
to  hold  the  land  until  she  redeemed,  or  her  right  of  redemption 
was  cut  off  by  the  judgment  of  a  court  of  competent  jurisdiction. 
The  continued  existence  of  the  del)t  is  the  birthmark  of  a  mort- 
gage, and  that  is  involved  in  the  concession  that  the  land  was  con- 
veyed as  security.  The  passing  of  the  law  day  did  not  extinguish 
her  right,  for  "once  a  mortgage,  always  a  mortgage"  is  a  maxim 
so  sound  and  ancient  as  to  be  a  rule  of  property.  As  the  deed  was  a 
mortgage  when  given,  it  did  not  cease  to  be  a  mortgage  after  the 
period  of  redemption  had  expired.  In  Macauley  v.  Smith,  supra,  it 
was  held  that  the  surrender  of  possession  by  the  grantor  to  the 
grantee  after  the  debt  became  due  did  not  prevent  the  levy  of  an 
attachment,  issued  in  behalf  of  creditors  of  the  former,  upon  lands 
conveyed  to  the  latter  as  security. 

The  plaintiff,  therefore,  is  a  mortgagor,  whose  right  to  redeem 
from  the  mortgagee  in  possession  has  not  been  cut  off  nor  cut  down 
by  any  act  or  omission  on  her  part.  As  the  defendants  stand  in 
the  shoes  of  Owen  Byrne,  with  no  rights  except  by  way  of  gift  under 
his  will,  the  case  is  the  same  in  principle  as  if  he  were  living  and) 
the  sole  defendant.  After  the  plaintiff  had  established  her  right 
to  redeem  as  to  him  what  answer  could  be  made  thereto?  Would 
it  be  an  answer  for  him  to  say,  "I  have  conveyed  the  lands  away, 
and,  therefore,  you  cannot  redeem?"  While  this  would  be  a  con- 
clusive answer  in  behalf  of  Walker,  the  present  owner  of  the  land, 
if  he  had  been  made  a  party  and  the  right  to  redeem  had  been 
asserted  against  him,  can  Owen  Byrne  or  his  devisees  say  that,  by 
his  wrongful  act  in  conveying  the  land,  he  deprived  the  plaintiff 
of  the  right  to  redeem  in  any  form  and  confined  her  to  an  action 
for  the  moneys  received  on  the  sale,  to  which  the  Statute  of  Limita- 
tions would  be  a  bar?  Can  a  mortgagee  by  his  own  act,  without 
a  judicial  sale  or  the  consent  of  the  mortgagor,  destroy  the  right 
to  redeem,  which  is  so  carefully  guarded  by  the  courts?  The  mort- 
gagee could  not,  by  selling  the  mortgaged  premises,  change  the 
rights  of  the  plaintiff  as  against  himself.  As  to  him,  she  still  has 
the  right  to  redeem,  for  by  his  act,  without  her  knowledge  or  con- 
sent, he  could  not  annul  his  covenant  to  reconvey.  That  covenant 
is  still  in  force,  and  the  plaintiff  may  compel  its  performance,  so 
far  as  the  rights  of  third  parties,  acquired  under  the  Recording 
Act,  will  permit.  As  Owen  Byrne  conveyed  to  a  bona  fide  pur-  , 
chaser,  the  plaintiff  cannot  follow  the  land  as  such,  but  she  is  not  \ 


384  EQUITY    RELATIONS 

i  prevented  by  that  wrongful  act  from  an}^  form  of  redemption  now 
practicable.    No  act  of  his  could  utterly  destroy  her  cause  of  action 
to  redeem.     He  might  affect  its  value,  but  he  could  not  take  its 
life.    As  a  substitute  for  a  decree  requiring  him  to  repurchase  the 
land  and  convey  it  to  her,  which  might  be  impossible  and  would  be 
apt  to  involve  hardship,  she  may  treat  the  value  of  the  land,  meas- 
ured in  money  presumed  to  be  in  his  hands  when  her  right  to  re- 
deem was  established,  as  land,  and  enforce  the  right  of  redemption 
accordingly.    Unless  we  virtually  sanction  his  wrongdoing  by  per- 
mitting him  to  defeat  her  right  of  redemption  absolutely  by  his 
own  act,  upon  showing  a  right  to  redeem  she  must  be  permitted  to 
make  the  best  redemption  possible  as  against  him.    Because  he  has 
put  it  out  of  his  power  to  render  to  her  all  she  is  entitled  to,  he 
cannot  refuse  to  make  the  nearest  approach  to  it  that  is  left.    A 
court  of  equity,  in  order  to  bring  about  an  equitable  result,  disre- 
gards forms  and  treats  money  as  land  and  land  as  money  when 
required  to  prevent  injustice.    A  mortgagee  in  possession  under  a 
recorded  deed,  absolute  on  its  face,  with  an  unrecorded  defeasance, 
cannot  sell  the  land  and  claim  that  the  purchase  price  is  money  as 
against  one  who  has  an  equitable  right  to  insist  that  in  legal  effect 
it  is  land.    As  the  plaintiff  established  a  right  to  redeem,  Owen 
Byrne  and  his  devisees  cannot  complain  if,  in  working  out  the  relief 
required  by  the  violation  of  his  covenant,  the  court  does  the  best 
it  can  to  right  the  wrong  by  treating  the  money  as  land.    In  order 
to  prevent  him  from  making  a  profit  out  of  his  wrong,  the  law 
raises  the  presumption  that  he  now  has  the  full  value  of  the  land 
as  a  separate  fund  in  his  hands,  and  treating  it  as  land  allows  the 
plaintiff  to  redeem,  the  same  as  if  it  were  in  fact  land.    As  against 
the  wrongdoer  and  his  estate  it  will  exert  all  its  power  to  make 
the  plaintiff  whole,  paying  due  regard  to  equities  arising  through 
improvements  upon  the  land,  so  as  not  to  give  her  more  than  she 
is  equitably  entitled  to. 

Thus,  in  Meehan  v.  Forrester,  supra,  the  court,  through  Rapallo, 
J.,  said:  "The  sale  was  shown  to  have  been  made  without  the 
consent  of  Meehan  and  in  violation  of  his  rights,  and  it  does  not 
appear  that  the  plaintiff  ever  had  notice  of  it.  He  was  not  bound 
by  such  a  sale.  He  was  entitled  to  his  land  on  payment  of  the 
amount  due  to  Bertine  or  his  representatives.  If  Bertine,  by  reason 
of  his  own  wrongful  act,  had  deprived  himself  of  the  ability  to 
restore  the  land  to  which  the  plaintiff  is  equitably  entitled,  he  or 
his  representatives  were  bound  to  account  to  the  plaintiff,  at  his 
election,  either  for  the  proceeds  of  sale  of  the  land  or  its  value  at 


MOONEY    V.    BYRNE  385 

the  time  when  the  plaintiff's  right  to  such  reparation  was  estab- 
lished {Hart  V.  Ten  Eyck,  2  Johns.  Ch.  117;  Peabody  v.  Tarbell, 
2  Cush.  227,  233;  May  v.  Le  Claire,  11  Wall.  230,  237)." 

In  that  case,  as  in  this,  the  only  cause  of  action  alleged  or  proved 
was  the  right  to  redeem;  but  as  the  premises  had  been  wrongfully 
conveyed,  the  plaintiff,  upon  estabHshing  such  right,  was  awarded 
compensation  on  the  basis  of  value  at  the  time  of  the  trial.  Com- 
pensation was  allowed  as  an  equitable  substitute  for  actual  redemp- 
tion. In  other  words,  the  land  which  should  have  been  conveyed 
was  appraised  by  the  court,  and  the  defendant  compelled  to  restore 
the  amount  of  the  appraisal,  as  the  only  method  of  redemption 
possible.  The  form  of  relief  granted  was  a  money  judgment,  but 
that  was  possible  only  because  a  right  to  redeem  had  been  estab- 
lished, for  without  that  right  the  relief  would  be  limited  to  the 
proceeds  of  the  sale  {Baily  v.  Hornthal,  154  N.  Y.  648,  661).  So 
in  the  case  at  bar,  the  plaintiff  established  the  same  right,  but  the 
defendant  showed  that  he  had  placed  it  beyond  his  power  to  recon- 
vey.  Thereupon  in  rebuttal  and  not  as  a  part  of  her  cause  of 
action,  the  plaintiff  had  the  right  to  prove  the  present  value  of  the 
land,  so  as  to  follow  the  money  presumed  to  be  in  the  defendant's 
hands,  and  redeem  that  which  he  had  wrongfully  substituted  for 
the  land,  the  same  as  if  it  were  in  fact  land.  Guided  by  the  cardinal 
principle  that  the  wrongdoer  shall  make  nothing  from  his  wrong, 
equity  so  moulds  and  applies  its  plastic  remedies  as  to  force  from 
him  the  most  complete  restitution  which  his  wrongful  act  will 
permit  (May  v.  Le  Claire,  78  U.  S.  217;  Van  Dusen  v.  Worrell, 
4  Abb.  Ct.  App.  Dec.  473;  Miller  v.  McGuckin,  15  Abb.  [N.  C] 
204;  Hart  v.  Ten  Eyck,  2  Johns.  Ch.  62,  108;  Ems  v.  Sutherland, 
11  Mich.  538,  542;  Budd  v.  Van  Orden,  33  N.  J.  Eq.  143;  s.  c,  id. 
564).  When  he  cannot  restore  the  land  it  will  compel  him  to 
restore  that  which  stands  in  his  hands  for  the  land,  and  will  not 
permit  him  to  assert  that  it  is  not  land  when  the  assertion  would 
be  profitable  to  himself  but  unjust  to  the  one  whom  he  wronged. 
He  cannot  escape  by  offering  to  pay  what  he  received  on  selling  the 
lands,  but  must  pay  the  value  at  the  time  of  the  trial.  He  cannot 
cut  off  the  right  of  redemption  and  convert  it  into  a  personal 
liability,  for  he  is  still  a  mortgagee,  and  subject  as  such  to  the 
mortgagor's  rights.  The  fact  that  the  injured  mortgagor  need  not 
take  the  proceeds  of  the  sale,  but  may  insist  on  the  proved  value 
of  the  land,  as  well  as  the  pleadings  and  proofs,  show  that  this  is 
a  pure  action  to  redeem,  and  must  be  so  regarded  for  all  purposes, 
including  the  defense  of  the  Statute  of  Limitations.     While  the 


386  EQUITY    RELATIONS 

mortgagor  is  helpless  as  against  his  grantee,  she  is  not  helpless  as 
against  him. 

The  defendants  insist  that  as  the  plaintiff  can  only  recover  a 
money  judgment,  the  cause  of  action  is  in  the  nature  of  an  account- 
ing for  money  had  and  received,  and  hence  that  the  six-year,  or  at 
most  the  ten-year  Statute  of  Limitations  is  a  bar.    This  is  not  an 
action,  however,  to  recover  money,  but  to  redeem  land  from  a 
mortgage,  and  but  for  the  misconduct  of  the  defendant  would 
have  resulted  simply  in  a  judgment  of  redemption,  with  an  account- 
ing for  the  rents  and  profits  of  the  land,  after  payment  of  the  debt 
by  the  plaintiff,  according  to  her  demand  and  offer  before  the 
commencement  of  the  action.    The  period  of  limitation  provided 
by  the  Code,  within  which  an  action  to  redeem  from  a  mortgage 
may  be  maintained,  is  twenty  years  after  breach  of  the  condition 
or  the  non-fulfillment  of  the  covenant  therein  contained  (Code  Civ. 
Pro.,  §  379).    So  far  as  the  defendants  are  concerned,  the  plaintiff 
had  a  right  to  redeem.     She  brought  her  action  to  redeem  and 
established  it  by  evidence,  and  was  entitled  to  judgment  accord- 
ingly; but  as  that  judgment  would  be  ineffectual  because  the  mort- 
gagee had  sold  the  land,  equity  will  simply  vary  its  relief  from  a 
judgment  of  redemption  in  land  to  a  judgment  of  redemption  in 
money  representing  the  land.     If  the  plaintiff  had  not  elected  to 
redeem,  but  to  sue  for  money  had  and  received  to  her  use,  the  case 
of  Mills  V.  Mills,  115  N.  Y.  80,  relied  upon  by  the  defendants, 
might  be  an  authority.    In  that  case,  however,  as  was  stated  by 
this  court,  "all  the  relief  asked  for  in  the  complaint  is  an  accounting 
and  a  judgment  for  a  sum  of  money,  and  no  other  relief  was  needed 
or  possible  upon  the  facts  estabhshed.    This  was  in  no  sense  an 
action  to  redeem,  as  there  was  no  mortgage  and  nothing  to  redeem." 
The  relief  demanded,  as  appears  from  the  appeal  book  on  file  in  this 
court,  was  simply  a  judgment  "for  all  moneys  received  by"  the 
defendant.    No  claim  was  made  that  the  two  transactions,  which 
were  four  years  apart,  constituted  a  mortgage,  or  that  there  was 
ever  a  right  to  redeem.     The  theory  of  the  action  was  that  the 
defendant  lawfully  sold  the  land  and  should  account  for  the  pro- 
ceeds, after  deducting  his  own  claim.    Thus,  the  court  said :  "Abso- 
lute title  to  the  lands  was  vested  in  the  defendant,  evidently  with 
the  intention  that  he  might  sell  them  and  reimburse  himself,  and 
pay  over  any  surplus  to  his  brother."    The  fundamental  fact  that 
the  defendant  sold  without  right  was  wanting  in  that  case,  and 
hence  the  principle,  which  is  the  basis  of  our  judgment,  could  not 
be  applied.    It  is  the  wrongful  conveyance  by  the  mortgagee  in 


MOONEY    V.    BYRNE 


387 


possession,  under  a  deed  absolute  on  its  face,  that  enables  a  court 
of  equity  to  hold  on  to  the  case  after  ordinary  redemption  has  been 
shown  to  be  impossible,  and  to  allow  such  a  redemption  against 
the  wrongdoer  as  will  prevent  him  from  gaining  by  his  wrong,  and 
will  give  the  plaintiff  her  due  as  nearly  as  may  be. 

The  judgment  appealed  from  should  be  reversed  and  a  new  trial 
granted,  with  costs  to  abide  event. 

Parker,  Ch.  J.,  Bartlett,  Martin  and  Werner,  JJ.,  concur; 
Gray,  J.,  not  voting;  Cullen,  J.,  not  sitting. 

Judgment  reversed,  etc} 


1  "That  the  deed  under  which 
defendant  held  the  land,  although 
absolute  in  form,  was  a  mortgage, 
admits  of  no  doubt.  .  .  .The  orig- 
inal character  of  the  transaction 
was  in  no  manner  changed  by  the 
renewal  of  the  note  for  the  balance 
and  by  accepting  a  new  agreement 
as  to  making  a  deed  on  payment  of 
the  sum  to  become  due,  notwith- 
standing it  contained  a  clause  de- 
claring time  of  payment  material 
and  of  the  essence  of  the  contract. 


and  in  case  of  failure  the  'interven- 
tion of  equity  is  forever  barred.' 
The  relation  of  mortgagor  and  mort- 
gagee still  continued."— Per  Scott,  J., 
in  Tennery  v.  Nicholson,  87  111.  464 
(1877).  Accord,  Clark  v.  Henry,  2 
Cowen  (N.  Y.),  324  (1823);  Stover  v. 
Bounds,  1  Oh.  St.  107  (1853);  Bearss 
V.  Ford,  108  111.  16  (1883);  Parmer 
V.  Parmer,  74  Ala.  285  (1883);  Turpie 
V.  Lowe,  114  Ind.  37  (1887),  and  the 
authorities  generally. 


"l 


CHAPTER  II.    (Continued) 
Section  II. — Release  of  the  Equity  of  Redemption 

TRULL  V.  SKINNER 
Supreme  Judicial  Court  of  Massachusetts,  1835 

(17  Pick.  213)  * 

Shaw,  C.  J.,,  delivered  the  opinion  of  the  court.  The  plaintiff 
has  brought  his  bill  in  equity  to  redeem  certain  mortgaged  premises 
[therein  described,  being  parcels  of  real  estate  situated  in  Cam- 
bridge. He  claims  title  as  the  purchaser  of  an  equity  of  redemption 
at  an  officer's  sale,  made  pursuant  to  the  statutes  providing  for  the 
seizure  and  sale  of  equities  of  redemption  for  satisfying  executions. 
The  sale  to  the  plaintiff  was  made  on  May  4,  1833,  for  $3500  on 
an  execution  and  judgment  recovered  by  Ezra  Trull  against  Royal 
Makepeace,  in  a  suit  in  which  the  premises  had  been  attached  on 
mesne  process  the  11th  of  April,  1832.  The  question  therefore  is, 
whether  Makepeace  had  such  an  equity  of  redemption,  liable  to  be 
taken  by  creditors,  either  in  May,  1833,  when  it  was  taken  in  execu- 
|tion,  or  in  April,  1832,  when  it  was  attached. 

There  is  no  doubt  that  the  transaction  of  September,  1827,  con- 
stituted a  mortgage.  Makepeace  conveyed  to  Skinner  &  Hurd  an 
estate  in  fee,  consisting  of  sundry  parcels  of  land;  and  at  the  same 
time  an  indenture,  bearing  the  same  date,  was  entered  into  by  the 
parties,  reciting  the  conveyance,  reciting  that  a  debt  was  due  from 
Makepeace  to  Skinner  &  Hurd,  and  containing  an  agreement  that 
Skinner  &  Hurd  should  purchase  in  the  equity  of  redemption,  then 
about  to  be  sold  on  execution,  should  pay  off  a  mortgage  due  to 
Dr.  Shattuck,  should  advance  further  sums  of  money,  and,  upon 
repayment  of  the  sums  due  to  them,  should  release  and  reassign  to 
Makepeace.  It  was  further  agreed  that  Makepeace  might  make 
sales  of  the  lands  from  time  to  time,  that  Skinner  &  Hurd  would 
execute  releases  pursuant  to  such  sales,  that  they  should  receive  the 
money,  the  proceeds  of  such  sales,  and  apply  it  to  the  payment  of 
the  debt,  and  should  account  for  the  surplus;  and  the  whole  was 
to  be  accomplished  in  three  years. 
388 


TRULL    V.    SKINNER  389 

Some  small  sales  were  made  pursuant  to  this  agreement,  and  in 
April,  1831,  a  large  part  of  the  debt  remaining  unpaid,  a  new 
arrangement  was  made,  also  by  indenture.  The  instrument  of 
defeasance,  before  held  by  Makepeace,  was  surrendered  and  de- 
livered up  to  be  cancelled,  and  new  stipulations  were  entered  into, 
by  which  Skinner  &  Hurd  leased  the  land  to  Makepeace  for  two 
years,  at  a  rent  about  equal  to  the  interest  on  the  debt;  and  they 
further  stipulated  that,  upon  the  payment  of  a  certain  sum  by 
IVIakepeace  in  two  years,  they  would  convey  the  estate  to  him. 

The  first  question  is  whether  this  last  agreement,  surrendering 
and  cancelling  the  instrument  of  defeasance,  was  an  extinguish- 
ment of  the  equity  of  redemption,  as  between  the  parties,  and 
against  the  creditors  of  the  mortgager.  The  court  are  of  opinion 
that  where  an  absolute  deed  is  given,  accompanied  by  a  simulta- 
neous instrument  operating  by  way  of  defeasance,  and  afterwards 
the  parties,  by  fair  mutual  stipulations,  agree  that  the  defeasance 
shall  be  surrendered  and  cancelled,  with  an  intent  to  vest  the  estate 
unconditionally  in  the  grantee  by  force  of  the  first  deed,  by  such 
surrender  and  cancellation  the  estate  becomes  absolute  in  the  mort- 
gagee. The  original  conveyance  stands  unaffected  in  form  and  le- 
gal effect;  it  conveys  an  estate  in  fee;  the  onlj^  party  who  could 
even  claim  a  right  to  deny  it  that  operation,  by  engrafting  a  con- 
dition upon  it,  has  voluntarily  surrendered  the  only  legal  evidence 
by  which  that  claim  could  be  supported,  and  is  thereby  estopped 
from  setting  it  up.  Such  cancellation  does  not  operate  by  way  of 
transfer,  nor,  strictly  speaking,  by  way  of  release  working  upon  the 
estate,  but  rather  as  an  estoppel  arising  from  the  voluntary  sur- 
render of  the  legal  evidence,  by  which  alone  the  claim  could  be 
supported:  like  the  cancellation  of  an  unregistered  deed  and  a 
conveyance  by  the  first  grantor  to  a  third  person  without  notice. 
The  cancellation  reconveys  no  interest  to  the  grantor,  and  yet 
taken  together  such  cancellation  and  conveyance  to  a  third  person 
make  a  good  title  to  the  latter  by  operation  of  law.  It  gives  a  seisin 
de  facto,  a  conveyance  by  deed  duly  registered  being  to  many 
purposes  equivalent  to  livery  of  seisin  (Higbee  v.  Rice,  5  Mass.  R. 
352).  It  is  good  against  the  grantor  and  his  heirs  by  force  of  the 
second  deed,  and  it  is  good  against  the  first  grantee  and  all  claim- 
ing under  him,  by  force  of  the  registry  acts  {Commonwealth  v. 
Dudley,  10  Mass.  R.  403).  But  the  point  now  decided,  of  the  effect 
of  cancelling  an  instrument  of  defeasance,  seems  to  be  settled  by 
authorities  {Harrison  v.  Phillips  Acadetny,  12  Mass.  R.  456;  Rice  v. 
Rice,  4  Pick.  349) .    But  this  rule  is  to  be  taken  with  this  qualification, 


390  EQUITY    RELATIONS 

that  the  transaction  is  conducted  with  perfect  fairness  and  good 
faith,  both  as  between  the  parties  and  as  against  the  creditors  of  the 
mortgagor,  and  that  the  rights  of  third  persons  had  not  intervened 
before  the  completion  of  the  transfer  by  the  cancellation.  But  if 
these  qualifications  do  exist,  if  no  unfair  advantage  is  taken  of  the 
mortgagor,  if  by  mutual  agreement  all  beneficial  and  available 
interest  of  the  mortgagor  is  taken  away,  in  a  form  which  must 
forever  prevent  him  from  enforcing  a  right  to  redeem  by  any  legal 
or  equitable  proceeding,  there  seems  to  be  no  interest  which  the 
creditor  of  such  party  can  take  for  the  satisfaction  of  his  claims. 

2.  The  court  are  also  of  opinion  that  the  agreement  by  Skinner 
&  Hurd  to  convey  upon  certain  terms  in  two  years,  contained  in  the 
indenture  of  April,  1831,  did  not  operate  as  a  defeasance,  so  as  to 
constitute  with  the  original  conveyance  a  new  mortgage,  because 
it  was  not  executed  at  the  same  time  with  the  conveyance  of  which 
it  is  claimed  to  be  a  defeasance,  nor  as  part  of  one  and  the  same 
transaction,  nor  was  so  understood  or  intended  by  the  parties 
(Kelleran  v.  Brown,  4  Mass.  R.  443;  Harrison  v.  Phillips  Academy, 
12  Mass.  R.  456). 

Perhaps  where  parties  by  mutual  agreement,  intending  to  en- 
large and  extend  the  time  of  redemption,  should  take  up  an  exist- 
ing instrument  of  defeasance  and  at  the  same  time  execute  another, 
connected  with  the  former  by  proper  recitals  and  provisions,  showing 
an  intention  to  continue  the  former  right  of  redemption  on  foot,  in 
a  modified  form,  by  force  of  this  substituted  instrument  of  defeas- 
ance, such  new  instrum.ent  might  be  so  construed  as  to  relate  back 
to  the  first  deed  and  preserve  the  mortgage,  when  such  construc- 
tion would  but  support  and  carry  into  effect  the  intent  of  the  par- 
ties; of  this,  however,  it  is  unnecessary  to  express  an  opinion.  The 
instrument  now  relied  on -as  a  defeasance  was  not  only  not  made  at 
the  same  time  the  original  deed  was  executed,  nor  at  the  time  it 
took  effect,  nor  was  it  either  actually  or  constructively  part  of  the 
same  transaction,  nor  was  it  a  case  where  the  parties  recognized 
it  as  a  mortgage,  or  intended  to  construe  or  carry  it  into  effect  as 
such.  The  court,  are  therefore,  of  opinion  that  by  the  surrender 
of  the  defeasance  the  right  in  equity  was  extinguished,  the  original 
mortgagee  remained  seized  by  force  of  the  first  deed,  and  the  new 
contract  did  not  constitute  a  new  mortgage,  nor  keep  the  existing 
equity  of  redemption  in  force. 

3.  This  leads  to  the  remaining,  and  perhaps  to  the  parties  the 
most  important  question,  whether  this  surrender  of  the  defeasance 
and  extinguishment  of  the  equity  was  good  against  the  creditors  of 


GREEN    V.    BUTLER  391 

Makepeace.  This  depends  mainly  on  the  questions  of  fact,  to 
which  much  evidence  was  taken,  whether  this  arrangement  was 
made  with  an  intent  to  delay,  defeat  or  defraud  the  creditors  of 
Makepeace;  whether  there  was  a  secret  trust  on  the  part  of  the 
respondents  to  hold  the  same,  in  whole  or  in  part,  for  the  benefit 
of  the  mortgagor;  and  whether  there  was  such  a  disparity  between 
the  value  of  the  estate  and  the  amount  for  which  it  was  taken  as 
to  lead  to  a  reasonable  inference  of  any  such  fraudulent  intent. 
(After  an  examination  and  summing  up  of  the  evidence:) 
Upon  the  whole  evidence  the  court  are  of  opinion  that  the  trans- 
action was  not  fraudulent,  that  the  equity  of  redemption  was  re- 
linquished before  the  attachment,  and  that  the  complainant  did 
not  acquire  a  right  to  redeem  under  the  officer's  deed. 

Bill  dismissed. 

GREEN  V.  BUTLER 

Supreme  Court  of  California,  1864 

(26  Cat  595) 

Appeal  from  the  District  Court,  Twelfth  Judicial  District,  city 
and  county  of  San  Francisco. 

This  action  was  brought  to  compel  an  accounting  and  a  recon- 
veyance of  the  property.  Plaintiff  claimed  that  the  deed  and  de- 
feasance constituted  a  mortgage,  and  that  Leavitt,  unknown  to 
plaintiff,  had  paid  Butler  a  large  portion  of  the  sum  mentioned  in 
the  defeasance  before  the  execution  of  the  same,  and  that  the 
amount  thus  paid  by  Leavitt,  and  the  proceeds  of  the  property 
received  by  Butler  as  mortgagee  in  possession,  had  satisfied  the 
mortgage,  and  that  Leavitt  and  Butler  had  combined  together 
to  defraud  plaintiff. 
The  other  facts  are  stated  in  the  opinion  of  the  court. 

By  the  court.  Sawyer,  J.  The  referee  finds,  among  other 
facts,  that  prior  to  the  14th  of  August,  1854,  the  plaintiff 
was  in  possession  of  the  lands  described  in  the  complaint;  i 
that  on  that  day,  for  a  valuable  consideration,  he  conveyed 
the  said  lands  and  improvements  thereon  by  a  deed  absolute 
on  its  face  to  the  defendant  Butler;  that  although  the  deed  was 
absolute  on  its  face,  it  was  intended  as  a  mortgage  to  secure  to 
said  defendants  certain  moneys,  due  and  to  grow  due,  for  erecting 
buildings  and  improvements  thereon  for  a  firm  composed  of  plaintiff 


/I 


392  EQUITY    RELATIONS 

and  defendant  Leavitt;  that  on  the  20th  of  October,  1854,  the  said 
firm  of  Green  &  Leavitt  had  an  accounting  with  defendant  Butler, 
and  that  upon  said  accounting  it  was  found  and  agreed  by  all  par- 
ties that  said  fimi  was  indebted  to  said  Butler  for  constructing  said 
improvements  in  the  sum  of  eight  thousand  five  hundred  dollars; 
that  on  said  20th  day  of  October  said  Butler  executed  and  delivered 
to  said  Green  &  Leavitt  a  written  defeasance,  whereby  he  bound 
himself,  upon  the  payment  by  them  to  him  on  or  before  March  1, 
1855,  the  said  sum  of  eight  thousand  five  hundred  dollars,  to  convey 
by  quit-claim  to  said  Green  &  Leavitt  the  said  premises,  and  cove- 
nanted in  said  defeasance  that  if,  after  said  1st  day  of  March,  he 
should  sell  said  premises,  he  would  pay  over  to  said  parties  any 
surplus  that  might  arise  over  his  debt  and  costs;  that  said  defend- 
ant Butler  on  the  1st  of  February,  1855,  with  the  consent  of  said 
plaintiff  and  said  defendant  Leavitt,  entered  into  possession  of 
said  premises  and  continued  in  possession  till  the  27th  day  of 
February,  1855. 

"That  on  the  said  27th  day  of  February,  a,  d.  1855,  at  said  city 
and  county,  the  said  plaintiff  and  the  said  defendant,  Joseph  E. 
Butler,  had  an  accounting  and  settlement  of  and  concerning  the 
said  plaintiff's  interest  in  and  to  the  land  described  in  said  com- 
plaint, and  the  improvements  then  thereon,  and  of  the  furniture 
tlien  in  said  'Ocean  House;'  on  which  accounting  and  settlement 
the  said  defendant,  Joseph  E.  Butler,  paid  to  the  said  plaintiff  the 
sum  of  two  thousand  dollars,  in  four  promissory  notes,  for  said 
plaintiff's  interest  in  and  to  said  land  and  the  improvements 
thereon,  and  the  furniture  then  in  said  house,  which  said  notes  were 
subsequently  paid ;  and  the  said  plaintiff  then  and  there,  in  consid- 
eration of  said  sum  of  two  thousand  dollars,  surrendered  the  said 
written  defeasance  to  the  said  defendant,  Joseph  E.  Butler,  for 
cancellation,  and  the  same  was  thereby  cancelled  as  against  the 
said  plaintiff." 

The  only  question  arising  on  the  record  is  as  to  the  effect  upon 
the  rights  of  the  parties  as  to  the  relief  sought  in  this  action,  of 
the  surrender  of  the  defeasance  to  be  cancelled,  under  the  agree- 
ment found  by  the  referee.  The  principles  stated  in  the  numerous 
cases  cited  by  appellant's  counsel  are  generally  admitted  to  be 
correct.  But  there  can  be  no  doubt  that  a  mortgage  can  make  a 
bona  fide  purchase  of  the  equity  of  redemption — if,  indeed,  we  may 
use  these  terms  in  the  present  condition  of  the  law  as  to  mortgages 
in  this  State — and  thereby  acquire  an  absolute  title.  The  prin- 
ciple is  well  stated  in  Remsen  v.  Hay,  2  Edw.  Ch.  535,  in  the  follow- 


GREEN    V.    BUTLER  393 

ing  terms:  "There  is  nothing  in  the  policy  of  the  law  to  prevent  a 
mortgagee  from  acquiring  an  absolute  ownership  by  purchase  from ' 
the  mortgagor  at  any  time  subsequent  to  the  taking  of  the  mort- 
gage, and  by  a  fresh  contract  to  be  made  between  them.  Courts 
view  with  jealousy  and  suspicion  any  dealings  between  the,  mort- 
gagor and  Mortgagee  to  extinguish  the  equity  of  redemption;  but 
if  it  be  fair  and  honest  on  the  part  of  the  mortgagee,  the  purchase 
will  not  be  disturbed.  The  law  only  prohibits  a  mortgagee  from 
availing  himself  of  a  stipulation  contained  in  the  mortgage  deed,  or 
of  some  covenant  or  agreement  forming  part  of  the  same  transac-  I 
tion  with  the  loan  and  the  taking  of  the  security,  by  which  he  shall  / 
attempt  upon  the  happening  of  some  future  event  or  contingency 
to  render  the  estate  irredeemable  and  obtain  an  absolute  owner- 
ship. In  such  cases  the  maxim  applies  of  '  Once  a  mortgage,  always 
a  mortgage '  (Henry  v.  Davis,  7  John.  Ch.  40;  Clark  v.  Henry,  2  Cow. 
332).  But  it  cannot  interfere  with  the  right  to  foreclose  when  the 
mortgage  has  become  forfeited,  nor  with  any  fresh  contract  which 
the  mortgagor  may  choose  to  make  with  the  mortgagee  for  a  sale 
or  relinquishment  of  the  equity  of  redemption  and  vesting  the 
latter  with  an  irredeemable  estate."  There  are  numerous  author- 
ities to  the  same  effect  (1  Wash.  Real  Prop.,  p.  496,  §§  23,  24; 
Dougherty  v.  McColgan,  6  Gill.  &  J.  275;  Russell  v.  Southard,  12 
How.  154;  Adams  v.  McKenzie,  18  Ala.  698). 

Independent  of  authority,  no  argument  is  necessary  to  show  that, 
upon  principle,  a  mortgagor  has  the  same  capacity  to  contract  with 
reference  to  his  interest  in  the  mortgaged  property  that  he  has  in 
respect  to  any  other  property.  Nor  has  section  two  hundred  and 
sixty  of  the  Practice  Act,  or  any  of  the  former  decisions  in  this 
State  relating  to  mortgages,  placed  any  restriction  upon  the  author- 
ity of  the  mortgagor  to  make  other  and  further  contracts  affecting 
his  title  to  the  land  subsequent  to  the  execution  of  the  mortgage. 
The  language  of  Mr.  Justice  Field  in  McMillan  v.  Richards,  9  Cal. 
365,  cited  by  counsel,  that  "the  owner  of  a  mortgage  in  this  State 
can  in  no  case  become  the  owner  of  the  mortgaged  premises,  except 
by  purchase  upon  sale  under  judicial  decree,  consummated  by  con- 
veyance," must  be  limited  to  the  question  then  under  discussion. 
He  was  simply  endeavoring  to  show  that  no  title  passed  by  the 
moi-tgage  alone,  either  before  or  after  default,  or  could  be  acquired 
under  it  by  strict  foreclosure  or  in  any  other  manner  than  by  a  sale 
under  a  decree  of  a  court,  and  that  in  such  case  the  title  did  not 
vest  till  consummated  by  a  convej'ance  after  the  period  for  redemp- 
tion had  expired.    He  had  no  reference  to  a  contract  affecting  the 


394  EQUITY  RELATIONS 

title,  made  by  the  mortgagor  himself  subsequent  to  the  making 
of  the  mortgage.  Reference  was  only  made  to  the  possibiUty  of 
acquiring  title  through  the  mortgage,  independent  of  any  further 
action  on  the  part  of  the  mortgagor. 

In  this  case,  according  to  the  finding  of  the  referee,  there  was 
|a  settlement  between  the  plaintiff  and  defendant  Butler,  by  which 
the  said  Butler  paid  to  plaintiff  for  his  interest  in  the  lands  and 
improvements  in  dispute  and  the  furniture  in  the  Ocean  House, 
situated  on  the  premises,  the  sum  of  two  thousand  dollars,  and  the 
plaintiff,  in  consideration  thereof,  surrendered  the  defeasance  to 
defendant  Butler  "for  cancellation,  and  the  same  was  thereby  can- 
celled as  against  the  said  plaintiff."  According  to  the  finding,  the 
sum  of  eight  thousand  five  hundred  dollars  was  secured  on  the 
premises,  which  premises  on  said  27th  of  February,  1855,  were  only 
worth  seven  thousand  five  hundred  dollars. 

The  referee  found  that  there  was  no  fraud  in  any  of  the  partic- 
ulars charged  in  the  complaint,  and  the  finding  in  respect  to  the 
charges  of  fraud  are  sufficiently  specific,  as  it  negatives  every  alle- 
gation of  fraud. 

He  does  not  say  in  so  many  words  in  his  finding  that;  the  mort- 
gage debt  remained  unpaid;  but  it  is  the  necessary  result  of  the 
findings  that  such  was  the  case,  and  that  the  full  amount  was  due. 
If  we  were  permitted  to  re-examine  the  evidence  in  the  record,  we 
are  not  prepared  to  say  he  erred.  The  parties,  at  the  time  of  the 
execution  of  the  defeasance,  struck  a  balance  themselves,  and  the 
evidence  to  disturb  their  own  settlement  is  exceedingly  loose  and 
unsatisfactory. 

The  surrender  of  the  defeasance  to  be  cancelled  with  an  intent 
to  vest  the  entire  estate  in  Butler  did  not  in  law  convert  the  mort- 
gage into  a  deed  or  operate  as  a  conveyance  of  Green's  title  to 
Butler.  Whether  it  operated  by  way  of  estoppel  in  equity  to  vest 
the  title  in  Butler  or  not,  it  is  not  now  necessary  to  determine.  The 
deed  to  Butler  being  absolute  on  its  face,  the  title  upon  the  record 
is  apparently  in  him.  The  plaintiff  seeks  the  aid  of  a  court  of  equity 
to  compel  a  conveyance  of  the  land  in  controversy  on  the  ground 
that  the  conveyance  to  Butler  was  a  mortgage,  and  that  the  mort- 
gage has  been  satisfied.  The  defendant  Butler  contests  the  claim 
and  shows  that  instead  of  the  mortgage  being  satisfied  he  had  paid 
the  full  value  of  the  premises  with  the  understanding  that  he  had 
purchased  the  plaintiff's  interest,  and  that  the  defeasance  was  sur- 
rendered to  be  cancelled  in  pursuance  of  the  agreement  between 
the  parties.    Butler  afterward  continued  in  possession  as  owner. 


GREEN    V.    BUTLER  395 

If  Butler  did  not  obtain  the  title  in  law,  he  paid  for  it  its  full  I 
value,  and  supposed  the  title  to  be  vested  in  him  by  the  surrender 
and  cancellation  of  the  defeasance  with  the  intention  of  so  vesting 
it.  The  surrender  of  the  defeasance  to  Butler  to  be  cancelled,  and 
the  retention  of  it  by  him,  is  in  law  a  cancellation  of  that  instru- 
ment, though  not  actually  destroyed. 

A  court  of  equity  will  not  aid  plaintiff  to  obtain  a  conveyance, 
under  the  circumstances  of  this  case,  in  direct  violation  of  his  own 
agreement  and  in  fraud  of  the  rights  of  defendant  Butler. 

Upon  the  allegations  of  the  plaintiff's  complaint,  it  is  at  least 
extremely  doubtful  whether  the  conveyance  to  Butler  can  be  re- 
garded as  a  mortgage  at  all.  The  distinct  allegations  of  the  com- 
plaint are,  not  that  the  land  was  conveyed  bj'  plaintiff  to  secure  the 
amount  due  Butler,  but  that  Butler  represented  that  there  were 
certain  mechanics'  liens  on  the  Ocean  House  which  the  claimants 
were  pressing  and  threatening  to  foreclose;  that  "said  Butler  was 
unable  to  procure  the  money  from  his  own  means  to  satisfy  the 
said  demands,  and  could  not  procure  the  money  for  that  purpose, 
unless  the  said  plaintiff  would  convey  to  the  said  Butler  the  said 
twenty-five  acres  of  land,  in  order  that  the  said  Butler  might  mort- 
gage the  said  land  and  buildings  to  procure  the  necessary  funds; 
and  that  the  said  plaintiff,  confiding,  etc.,  did,  on  the  said  14th 
day  of  August,  1854,  make,  execute  and  deliver  to  the  said  Butler 
a  deed  of  the  said  twenty-five  acres  of  land  for  the  purpose  afore- 
said, and  not  absolutely,  nor  for  other  purpose,"  and  plaintiff's 
counsel  contends  that  the  testimony  really  established  these  very 
allegations,  and  nothing  more,  with  respect  to  the  object  of  the  con- 
veyance at  the  time;  and  if  we  could  look  at  the  testimony,  it  does 
seem  to  tend  strongly  in  that  direction.  Now  if  this  was  the  only 
object  of  the  conveyance  at  the  time  it  was  made,  it  certainly  was 
not  at  that  time  in  any  sense  a  mortgage.  It  was  a  conveyance 
of  the  title  to  Butler,  not  to  secure  his  demand,  but  to  enable 
Butler  to  mortgage  it  to  raise  money  to  pay  off  the  liens  of  the 
mechanics.  And  such  a  conveyance  certainly  passed  the  fee  at  the 
time.  True,  Butler  would  have  held  the  legal  title  in  trust  for 
plaintiff,  but  upon  what  principle  can  it  be  said  that  afterwards, 
in  October  following,  the  execution  of  the  instrument,  which  has 
been  called  a  defeasance — an  entirely  distinct  transaction — trans- 
muted the  original  conveyance  in  fee  into  a  mortgage?  In  TruU 
V.  Skinner,  17  Pick.  216,  it  was  held  that  where  a  deed  was  executed 
and  at  a  subsequent  time  a  defeasance  was  also  executed,  the  deed 
and  defeasance  subsequently  executed  did  not  together  constitute 


396  EQUITY   RELATIONS 

a  mortgage,  because  the  defeasance  was  not  executed  at  the  same 
time  with  the  deed,  and  was  not  a  part  of  one  and  the  same  trans- 
action. From  the  execution  of  the  instrument  called  a  defeasance 
and  the  facts  found  by  the  referee  it  is  evident  that  the  parties,  at 
the  time  of  the  execution  of  the  defeasance,  intended  to  make  the 
two  instruments  serve  the  purpose  of  a  mortgage,  whatever  the 
legal  effect  of  the  transactions  might  be,  as  they  also  intended  to 
vest  full  title  in  Butler  by  the  subsequent  surrender  of  the  defeas- 
ance. The  referee  found  the  transaction  to  be  a  mortgage,  con- 
trary, perhaps,  to  these  allegations  of  the  complaint,  and  against 
the  protest  of  the  plaintiff.  If  not  a  mortgage,  the  legal  title  is 
certainly  in  the  defendant  Butler. 

But  it  is  not  necessary  to  determine  whether  upon  the  facts 
alleged  in  the  complaint  the  two  instruments  in  law  constituted 
a  mortgage  or  not;  for  in  either  view,  taken  in  connection  with  the 
other  findings,  we  think  the  plaintiff  is  not  entitled  to  any  relief 
upon  the  case  made  by  the  record. 

The  judgment  is  therefore  affirmed.^ 


VILLA   V.   RODRIGUEZ 

Supreme  Court  of  the  United  States,  1870 

(12  Wall.  323) 

Mr.  Justice  Swayne  delivered  the  opinion  of  the  court. 

This  is  an  appeal  in  equity  from  the  decree  of  the  Circuit  Court 
of  the  United  States  for  the  District  of  California.  The  appellant 
was  the  complainant  in  the  court  below.  The  decree  was  against 
him. 

He  seeks  to  redeem  the  premises  in  controversy  according  to  the 
prayer  of  his  bill.  The  defendant  Rodriguez  claims  an  indefeasible 
estate  in  them  as  regards  the  complainant  and  those  from  whom 
he  derives  title.  The  other  defendants  claim  under  a  contract  of 
purchase  made  with  Rodriguez.  The  validity  of  the  complainant's 
title,  if  his  grantor  had  anything  to  convey,  is  not  questioned.  Nor 
is  the  original  title  of  his  grantor  and  of  those  who  conveyed  to  him 
denied.    But  the  defendants  insist  that  the  title  of  all  those  parties 

^Vennum  v.  Babcock,  13  la.  194  St.  1  (1877);  Bazemore  v.  Mullins, 
fl862);  West  v.  Reed,  55  111.  242  52  Ark.  207  (1889),  occorrf.  Jones  v. 
(1870);  Show  v.   Walbridge,  33  Oh.       Blake,  33  Minn.  362  (1885),  contra. 


VILLA    V.    RODRIGUEZ  397 

was  vested  absolutely  in  Rodriguez  by  deeds  duly  made  and  re- 
corded before  the  conveyances  to  the  complainant  and  his  grantor 
were  executed.  The  complainant  insists  that  Rodriguez,  after,  as 
before,  the  legal  title  was  convej'ed  to  him,  held  the  premises 
only  as  security  for  a  debt.  This  is  the  hinge  of  the  controversy 
between  the  parties. 

The  entire  tract,  of  which  the  premises  in  controversy  form  a 
part,  was  conveyed  by  Jose  Maria  Villavicencia  on  the  13th  of 
April,  1852,  to  his  seven  children.  He  died  in  1853.  The  widow 
and  five  of  the  children  conveyed  to  Fulgencio,  also  one  of  the 
children,  on  the  16th  of  December,  1867.  On  the  26th  of  the  same 
month  Fulgencio  conveyed  to  the  complainant.  By  virtue  of 
this  conversance  he  claims  six-sevenths  of  the  tract.  That  propor- 
tion is  his  if  his  title  be  valid. 

The  widow  is  the  sister  of  the  defendant  Rodriguez.  On  the  4th 
of  December,  1860,  she  and  three  of  the  children,  the  other  four 
being  under  age,  executed  to  Rodriguez  for  money  then  borrowed 
a  note  for  four  thousand  dollars,  payable  a  year  from  date  and 
bearing  interest  at  the  rate  of  two  per  cent,  a  month,  payable  at 
the  end  of  each  six  months  thereafter;  the  interest,  "if  not  so  paid, 
to  be  added  to  the  principal  and  draw  interest  at  the  same  rate, 
compounding  in  the  same  manner."  A  mortgage  upon  the  entire 
tract  was  given  at  the  same  time  by  the  makere  of  the  note  to  secure 
its  payment.  The  mortgage  contained  a  provision  that  in  default 
of  the  payment  of  the  interest  as  stipulated  the  principal  should 
become  due  and  payable  at  the  option  of  the  mortgagee,  and  that 
the  mortgage  might  thereupon  be  foreclosed  and  the  premises  sold 
to  satisfy  the  mortgage  debt;  and  that  out  of  the  proceeds  of  the 
sale  the  mortgagee  should  be  authorized  to  retain,  besides  his  debt 
and  costs,  a  counsel  fee  of  five  per  cent,  upon  the  amount  found 
to  be  due.  The  mortgage  contained  a  further  provision  that  the 
mortgagee  might  pay  all  taxes  and  incumbrances  on  the  property, 
and  that  the  amount  of  such  advances  should  be  secured  by  the 
mortgage,  and  should  also  bear  interest  at  the  rate  of  two  per  cent, 
per  month.  Rodriguez  subsequently  paid  SI,  172  to  redeem  the 
property  from  a  sale  for  taxes.  On  the  29th  of  April,  1864,  the 
widow  and  five  of  the  children  conveyed  to  him  by  a  deed  absolute 
in  form.  It  is  recited  in  the  deed  that  the  debt  secured  by  the 
mortgage  then  amounted  to  about  $10,000.  On  the  17th  of  Febru- 
ary, 1865,  one  of  the  children,  who  was  a  minor  when  this  deed  was 
executed,  and  hence  had  not  joined  in  it,  also  conveyed  to  Rodri- 
guez.   Nothing  was  paid  to  the  grantor.    On  the  20th  of  May,  1865, 


398  EQUITY    RELATIONS 

the  other  and  seventh  child,  who  had  then  become  of  age,  executed 
a  hke  conveyance.    The  consideration  paid  was  SIOO. 

On  the  22d  of  July,  1866,  Rodriguez  demised  the  premises  so 
conveyed  to  him  to  his  co-defendants,  Edgar  W.,  Isaac  C,  and 
Rensselaer  E.  Steele.  The  defendant,  George  Steele,  subsequently 
became  interested  in  this  contract  by  an  arrangement  with  the 
lessees.  The  leasehold  term  was  for  five  years  from  the  1st  of 
August,  ensuing  its  date.  Rodriguez  stipulated  that  at  the  end  of 
the  term  or  within  five  days  thereafter  the  lessees  might  purchase 
by  paying  him  -125,000  in  gold,  and  upon  such  payment  being  so 
made,  he  covenanted  that  he  would,  by  a  sufficient  deed,  release  and 
quit-claim  to  the  lessees  or  their  heirs  and  assigns,  free  from  all 
incumbrances  created  by  him,  all  the  right  and  title  which  he  then 
had  to  the  premises  or  which  he  might  thereafter  acquire  from  the 
United  States  or  from  any  of  the  heirs  of  Jose  Maria  Villavicencia. 
The  lessees  and  then-  assignees  insist  that  they  are  bona  fide 
purchasers  without  notice. 

This  proposition  cannot  be  maintained.  The  contract  gave  them 
the  option— it  did  not  bind  them — to  buy  at  the  time  specified. 
That  time  had  not  arrived  when  this  bill  was  filed.  No7i  constat 
that  they  would  then  exercise  their  election  affirmatively  and  pay 
the  stipulated  price.  But  this  point  is  not  material.  The  doctrine 
invoked  has  no  application  where  the  rights  of  the  vendee  he  in  an 
executory  contract.  It  applies  only  where  the  legal  title  has  been 
conveyed  and  the  purchase-money  fully  paid  (Nace  v.  Boyer,  30 
Pennsylvania,  110;  Boone  v.  Chiles,  10  Peters,  177,  211).  The 
purchaser  then  holds  adversely  to  all  the  world,  and  may  disclaim 
even  the  title  of  his  vendor  (Croxall  v.  Shererd,  5  Wallace,  289). 
This  contract  calls  for  a  quit-claim  deed.  The  result  would  be 
the  same  if  such  a  deed  had  been  executed  and  full  payment  made 
without  notice  of  the  adverse  claim.  Such  a  purchaser  cannot  have 
the  immunity  which  the  principle  sought  to  be  apphed  gives  to 
those  entitled  to  its  protection  (Ma^j  v.  Le  Claire,  11  id.  232;  Oliver  v. 
Piatt,  3  Howard,  363).  This  contract  may,  therefore,  be  laid  out 
of  view.  It  is  no  impediment  to  the  assertion  of  the  complainant's 
rights,  whatever  they  may  be.  It  does  not  in  any  wise  affect  them. 
The  law  upon  the  subject  of  the  right  to  redeem  where  the  mort- 
gagor has  conveyed  to  the  mortgagee  the  equity  of  redemption  is 
well  settled.  It  is  characterized  by  a  jealous  and  salutary  policy. 
Principles  almost  as  stern  are  apphed  as  those  which  govern  where 
a  sale  by  a  cestui  que  trust  to  his  trustee  is  drawn  in  question.  To 
give  validity  to  such  a  sale  by  a  mortgagor  it  must  be  shown  that 


VILLA    V.    RODRIGUEZ  399 

the  conduct  of  the  mortgagee  was,  in  all  things,  fair  and  frank,  and 
that  he  paid  for  the  property  what  it  was  worth.  He  must  hold  out 
no  delusive  hopes;  he  must  exercise  no  undue  influence;  he  must 
take  no  advantage  of  the  fears  or  poverty  of  the  other  party.  Any 
indirection  or  obliquity  of  conduct  is  fatal  to  his  title.  Every  doubt 
will  be  resolved  against  him.  Where  confidential  relations  and  the 
means  of  oppression  exist,  the  scrutiny  is  severer  than  in  cases  of 
a  different  character.  The  form  of  the  instruments  employed  is 
immaterial.  That  the  mortgagor  knowingly  surrendered  and  never 
intended  to  reclaim  is  of  no  consequence.  If  there  is  vice  in  the 
transaction,  the  law,  while  it  will  secure  to  the  mortgagee  his  debt 
with  interest,  will  compel  him  to  give  back  that  which  he  has  taken 
with  unclean  hands.  Public  policy,  sound  morals,  and  the  protec- 
tion due  to  those  whose  property  is  thus  involved,  require  that  such 
should  be  the  law  (Morris  v.  Nixon,  1  Howard,  118;  Russell  v. 
Southard,  12  id.  139;  Wakeman  v.  Hazleton,  3  Barbour's  Chancery, 
148;  4  Kent's  Commentaries,  143;  Holmes  v.  Grant,  8  Paige,  245; 
3  Leading  Cases  in  Equity,  625). 

The  terms  exacted  by  the  loan  by  Rodriguez  were  harsh  and 
oppressive.  The  condition  of  the  widow  and  orphans  might  well 
have  touched  his  kindred  heart  with  sympathy.  It  seems  only  to 
have  whetted  his  avarice.  Two  per  cent,  a  month — and  this,  if  not 
paid  as  stipulated,  to  be  compounded — was  a  devouring  rate  of 
interest.  It  was  stipulated  that  the  further  advances  should  bear 
interest  at  the  same  rate.  He  demanded  an  adjustment  when,  from 
the  failure  of  the  crops  and  other  causes,  the  property  was  greatly 
depressed,  and  he  knew  the  widow  and  her  children  had  no  means 
of  payment.  The  alternatives  presented  were  an  absolute  conve\ 
ance  of  the  property  or  a  foreclosure  and  sale  under  the  mortgage. 
He  was  anxious  to  procure  the  deed,  and  exulted  when  he  got  it 
The  debt  and  advances,  with  the  interest  superadded,  were  much 
less  than  the  value  of  the  property.  The  note  and  mortgage  were 
executed  by  three  of  the  children  and  the  widow— the  deed  by  the 
widow  and  five  of  the  children.  The  other  two  children  conveyed 
at  later  periods.  The  consideration  of  the  conveyance  by  the  four 
children  not  parties  to  the  note  and  mortgage  was  such  that  if  an 
absolute  title  passed,  their  deeds  must  be  regarded  as  deeds  of  gift 
of  their  shares  of  a  valuable  estate.  Dana,  who  took  the  acknowl- 
edgment of  the  deed  executed  by  the  widow  and  five  children,  testi- 
fies that  the  widow  inquired  whether  the  deed  contained  all  the 
agreements  between  her  and  Rodriguez.  Dana  translated  it  to  her. 
She  complained  that  the  agreements  were  omitted.    Rodriguez  in- 


400  EQUITY   RELATIONS 

sisted  that  they  were  in  the  deed,  and  added  "that  they  ought  not 
to  distrust  him,  as  he  was  taking  all  these  steps  for  their  interest." 
The  widow  and  children  then  executed  the  deed.  Dana,  speaking 
of  a  subsequent  conversation  with  Rodriguez  on  the  same  day, 
"which  was  altogether  unsoUcited,"  says:  "He  stated  to  me  that 
his  object  in  getting  the  Villavicencia  family  to  execute  the  deed 
aforesaid  was  to  secure  his  money,  money  which  he  had  loaned  or 
advanced  to  them,  and  save  the  property  for  the  benefit  of  his  sister 
and  her  family;  while  if  it  remained  in  their  hands  he  might  lose 
his  money,  and  his  sister  and  her  children  would  lose  the  whole 
property.  He  said  they  had  done  wisely  in  trusting  him,  as  he 
intended  to  deal  justly  by  his  sister."  Rodriguez  was  examined  as 
a  witness.  Referring  to  a  period  shortly  preceding  the  execution 
of  this  deed,  he  says:  "Afterwards  I  had  with  them  further  con- 
versation, and  told  them,  I  don't  wish  to  speculate  upon  you,  be- 
cause you  are  my  relations,  and  you  have  treated  me  well.  If  I  can 
sell  the  ranch  for  enough  to  reimburse  myself  for  my  outlays  as  well 
as  interest,  I  will  return  you  the  surplus  money,  if  any;  and,  also,  if 
I  can  sell  a  portion  of  the  ranch  or  enough  to  reimburse  myself  for 
my  advance,  I  will  do  the  same,  and  return  to  you  the  unsold  por- 
tion of  the  ranch ;  but  if  I  have  bad  luck  and  cannot  sell  it,  I  will  lose 
my  monej'."  Elsewhere  in  the  same  deposition  he  says:  "I  stated 
at  the  ranch,  and  again  stated  to  my  sister  afterwards,  that  I  would 
return  the  surplus  money,  but  it  was  no  obligation  of  mine.  It 
may  be  that  I  said  so  to  Charles  Dana  at  that  time." 

He  made  the  same  admissions  to  other  persons  who  are  in  no  wise 
connected  with  this  litigation.  Their  testimony  is  found  in  the 
record.  It  is  unnecessary  to  extend  the  Hmits  of  this  opinion  by 
accumulating  and  commenting  upon  it.  The  widow  and  five  of  the 
children,  all  who  have  been  examined,  testify  that  they  understood 
the  deeds  to  be  only  security  for  the  debt.  This  explains  the  trans- 
action as  to  those  who  were  not  parties  to  the  note  and  mortgage. 
There  is  no  other  way  of  accounting  for  their  conduct.  The  testi- 
mony of  Rodriguez  alone  is  sufficient  to  turn  the  scale  against  him. 
He  cannot  repudiate  the  assurances  upon  which  his  grantors  were 
drawn  in  to  convey.  To  permit  him  to  do  so  would  give  triumph 
to  iniquity.  The  facts  indisputably  established  bring  the  case 
clearly  within  those  principles  by  the  light  of  which,  in  determining 
the  rights  of  the  parties,  the  judgment  of  this  court  must  be  made 
up.  The  complainant  stands  in  the  place  of  those  from  whom  he 
derives  title.  He  is  clothed  with  their  rights,  and  is  entitled  to 
redeem  six-sevenths  of  the  premises  upon  paying  that  proportion 


ODELL  V.   MONTROSS  401 

of  the  mortgage  debt  and  interest.  The  former  must  be  held  to 
include  the  amount  advanced,  as  well  as  that  represented  by  the 
note,  and  the  latter  be  settled  by  the  terms  of  the  contract  and  the 
law  of  California.  The  rents,  issues,  and  profits,  and  improvements 
made  upon  the  premises  must  also  be  taken  into  the  account. 

The  decree  is  reversed,  and  the  cause  will  be  remanded  to  the 
circuit  court  with  directions  to  enter  a  decree  and  proceed 

In  conformity  to  this  opinion} 


ODELL  V.  MONTROSS 

Court  of  Appeals  of  New  York,  1877 

(68  N.  Y.  499) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  the  first  judicial  department  in  favor  of  defendant, 
entered  upon  an  order  reversing  a  judgment  in  favor  of  plaintiff, 
entered  upon  a  decision  of  the  court  on  trial  at  Special  Term  and 
directing  judgment  for  defendant. 

This  action  was  brought  to  have  a  deed,  absolute  on  its  face, 
declared  a  mortgage,  and  for  an  accounting  and  reconveyance  on  ' 
paj'ment  of  amount  due. 

The  court  found,  in  substance,  that  in  July,  1865,  plaintiff,  being 
indebted  to  defendant  for  moneys  loaned  and  advanced,  executed 
to  said  defendant  a  deed  of  the  premises  described  in  the  complaint, 
which  deed  was  absolute  on  its  face  and  purported  to  convey  the 
fee,  but  that  it  was  executed  as  and  intended  as  a  security  for  the 
said  indebtedness  then  existing  and  what  might  thereafter  accrue; 
and  it  was  agreed  and  intended  by  the  parties  that  plaintiff,  upon 
payment,  should  have  the  right  to  redeem  and  should  be  entitled 
to  a  reconveyance.  That  in  September,  1866,  defendant  paid  to 
the  plaintiff  at  his  request  the  sum  of  fifty  dollars,  and  plaintiff  then 
and  there  signed  and  delivered  to  the  defendant  a  paper,  of  which 
the  following  is  a  copy,  viz. : 

"New  York,  Sept.  17,  1866. 

"Received  from  William  Montross  fifty  dollars,  in  full  satisfac- 
tion for  all  claims  and  demands  whatsoever  as  to  the  conveyance 
of  property,  or  otherwise,  up  to  this  date. 

"Thomas  B.  Odell." 

1  Vernon  v.  BetheU,  2  Eden,  110  (1877),  accord.  Compare  Rmsell  v. 
(1761);  Peugh  v.  Davis,  96  U.  S.  332      Soidhard,  p.  146,  supra. 


402  EQUITY   RELATIONS 

That  such  payment  was  made  and  received  and  such  receipt 
signed  and  dehvered  with  the  intention  of  the  parties  that  the  same 
should  be  a  full  settlement  of  all  claims  of  plaintiff  to  said  lands 
and  premises  and  of  all  claims  to  any  reconveyance  thereof.  As 
conclusions  of  law  the  court  found  that  the  deed  was  to  be  con- 
sidered as  a  mortgage;  that  the  payment  of  the  fifty  dollars  and 
the  receipt  given  therefor  did  not  operate  to  change  the  nature  of 
the  deed  from  a  security  to  an  absolute  conveyance,  nor  to  release 
plaintiff's  right  to  redeem,  and  that,  upon  payment  of  the  sums  due 
from  plaintiff  to  defendant  and  the  sums  paid  out  by  the  latter, 
plaintiff  was  entitled  to  redeem;  and  judgment  was  directed 
adjudging  that  upon  payment  of  such  sums  within  thirty  days 
defendant  should  reconvey,  and  in  default  of  such  payment  that 
the  premises  be  sold,  as  in  foreclosure  sales. 

Judgment  was  entered  accordingly. 

Allen,  J.  Prior  to  the  transaction  of  the  seventeenth  of  Septem- 
ber, 1866,  when  the  defendant  upon  the  payment  of  fifty  dollars 
to  the  plaintiff  took  an  unsealed  paper  signed  by  him  acknowledg- 
ing the  receipt  of  the  fifty  dollars  "in  full  satisfaction  for  all  claims 
and  demands  whatsoever  as  to  conveyance  of  property  or  otherwise 
up  to  this  date,"  the  relation  of  the  parties  in  respect  to  the  lands 
now  sought  to  be  redeemed  was  that  of  mortgagor  and  mortgagee 
with  all  the  incidents  of  that  relation  (4  Kent's  Com.  143).  The 
plaintiff  had  conveyed  the  premises  to  the  defendant  by  deed  ab- 
solute in  terms,  but  the  conveyance  was  not  intended  as  a  sale,  but 
as  a  security  for  the  payment  of  money,  and  although  there  was  no 
defeasance  in  writing,  the  intent  could  be  and  was  shown  by  parol 
evidence,  and  the  deed  was  but  a  mortgage.^  Parol  evidence  is 
admissible  to  show  that  an  absolute  deed  was  intended  as  a  mort- 
gage, or  that  a  defeasance  has  been  destroyed  by  fraud  or  mistake 
(Dey  v.  Dunham,  2  J.  Ch.  R.  182;  Clark  v.  Henry,  2  Cow.  324; 

*  See   New    York    Real    Property  the  recording  thereof,   unless  every 

Law,    §320:    "Certain   deeds   deemed  writing,  operating  as  a  defeasance  of 

mortgages. — A    deed    conveying    real  the  same,  or  explanatory  of  its  being 

property,  which,  by  any  other  writ-  desired  to  have  the  effect  only  of  a 

ten   instrument,    appears   to   be   in-  mortgage,  or  conditional  deed,  is  also 

tended  only  as  a  security  in  the  na-  recorded  therewith,  and  at  the  same 

ture    of    a    mortgage,    although    an  time." 

absolute  conveyance  in  terms,  must  This  section   is  commented  upon 

be  considered  a  mortgage;  and  the  in  Matter  of  Mechanics'   Bank,   ISft 

person  for  whose  benefit  such  deed  App.  Div.  343,  347  (1913). 
is  made,  derives  no  advantage  from 


ODELL    V.    MONTROSS  403 

Marks  v.  Pell,  1  J.  Ch.  R.  594;  Horn  v.  Keteltas,  46  N.  Y.  605). 
A  conveyance  absolute  in  terms  given  as  a  security  is  a  mortgage 
with  all  the  incidents  of  a  mortgage,  and  the  rights  and  obligations 
of  the  parties  to  the  instrument  are  the  same  as  if  the  deed  had 
been  subject  to  a  defeasance  expressed  in  the  body  of  the  instru- 
ment or  executed  simultaneously  with  it  (4  Kent's  Com.,  supra). 
It  must  be  recorded  as  a  mortgage  and  not  as  a  deed.  Deij  v.  Dun- 
ham, supra.  This  case  was  reversed  in  15  Johnson's  Reports,  555, 
but  this  principle  was  recognized  by  the  appellate  court  that  re- 
versed the  decree  of  the  chancellor.  The  reversal  was  on  the  ground 
that  the  subsequent  purchaser  claiming  adversely  to  the  deed  was 
not  a  purchaser  in  good  faith,  and  so  not  within  the  protection  of 
the  recording  acts  (James  v.  Johnson,  6  J.  Ch.  R.  417;  2  Cow.  249). 
In  White  v.  Moore,  1  Paige,  551,  the  chancellor  held  that  the  fact 
that  there  was  no  defeasance  in  writing  did  not  take  the  instrument 
out  of  the  effect  of  the  statute  requiring  all  mortgages  to  be  re- 
corded as  mortgages. 

The  estate  remaining  in  the  mortgagor  after  the  law  day  has 
passed,  before  foreclosure,  is  popularly  but  erroneously  called  an 
equity  of  redemption,  retaining  the  name  it  had  when  the  legal 
estate  was  in  the  mortgagee  and  the  right  to  redeem  existed  only  in 
equity.     Although  a  misnomer,  it  does  not  mislead.     The  legal 
estate  remains  in  the  mortgagor  and  is  subject  to  dower  and  cur- 
tesy, to  the  lien  of  judgments,  may  be  sold  on  execution  and  may  be 
mortgaged  or  sold  as  any  other  estate  in  lands,  while  the  mortgagee 
has  but  a  Hen  upon  the  lands  as  a  security  for  his  debt,  and  the  land 
is  not  liable  to  his  debts,  or  subject  to  dower  or  curtesy,  or  any  of 
the  incidents  of  an  estate  in  lands  (2  Wash.  R.  P.  152  and  seq.; 
Jackson  v.  Willard,  4  J.  R.  41;  Powell  on  Mortgages,  258,  N.  L.). 
The  mortgagor  is  possessed  of  an  estate  in  the  land  in  virtue  of  his 
former  and  original  right,  and  there  is  no  change  of  ownership. 
So  far  as  the  entire  estate  is  concerned  there  is  but  one  title,  and 
this  is  shared  between  the  mortgagor  and  mortgagee,  the  one  being 
the  general  owner  and  the  other  having  a  lien  which,  upon  a  fore- 
closure of  the  right  to  redeem,  may  ripen  into  an  absolute  title,  their 
respective  parts  when  united  constituting  one  title.    A  mortgagor 
and  mortgagee  may  at  any  time  after  the  creation  of  the  mortgage 
and  before  foreclosure  make  any  agreement  concerning  the  estate 
they  please,  and  the  mortgagee  may  become  the  purchaser  of  the 
right  of  redemption.    A  transaction  of  that  kind  is,  however,  re- 
garded with  jealousy  by  courts  of  equity,  and  will  be  avoided  for 
fraud,  actual  or  constructive,  or  for  any  unconscionable  advantage 


404  EQUITY   RELATIONS 

taken  by  the  mortgagee  in  obtaining  it.  It  will  be  sustained  only 
when  bona  fide;  that  is,  when  in  all  respects  fair  and  for  an  ade- 
quate consideration  (Trull  v.  Skinner,  17  Pick.  213;  Patterson  v. 
Yeaton,  47  Maine,  306;  Ford  v.  Olden,  L.  R.  3  Eq.  Cases,  461; 
Kaldridge  v.  Gillespie,  2  J.  Ch.  R.  30;  Wash,  on  Real  Prop.,  ch.  16, 
§  1,  pl.  24). 

The  defendant  claims  to  have  extinguished  the  right  of  redemp- 
tion and  acquired  the  entire  estate  by  the  payment  of  the  fifty 
dollars  and  in  virtue  of  the  written  acknowledgment  of  its  payment 
for  the  purposes  named  in  it.  The  paper  is  in  its  terms  ambiguous. 
It  does  not  purport  to  convey  or  transfer  any  property  or  estate  in 
lands,  but  is  declared  to  be  in  full  of  all  claims  and  demands  what- 
soever as  to  conveyance  of  property  or  otherwise.  It  is  but  a  parol 
admission  of  a  satisfaction  for  the  right  mentioned.  The  apparent 
meaning  of  the  instrument  is  to  admit  a  satisfaction  of  all  claims 
against  the  defendant,  claims  and  demands  that  may  be  enforced 
whether  such  claims  are  of  a  right  to  a  conveyance  of  property  or 
any  other  matter.  The  plaintiff  required  no  conveyance  of  the 
lands  from  the  defendant.  Upon  the  payment  of  the  mortgage  debt 
he  would  have  been  reinvested  with  the  unincumbered  title  without 
conveyance  or  release  from  the  defendant.  As  evidence  of  his  title 
he  might  have  required  a  reconveyance  or  a  satisfaction  of  the 
mortgage,  and  that  the  courts  would  have  compelled.  But  his  right 
of  redemption  was  not  in  any  sense  a  "claim  or  demand  as  to 
conveyance  of  property  or  otherwise."  The  receipt  had,  upon  its 
face  and  without  explanation,  respect  to  personal  claims  and 
demands  against  the  defendant.  But  the  transaction  was  explained 
upon  the  trial  and  shown  to  have  been  intended  as  a  full  settlement 
of  all  claims  of  the  plaintiff  to  the  lands  and  premises  and  of  all 
claims  to  a  reconveyance  thereof.  If  this  payment  and  receipt  did 
operate  to  change  the  nature  of  the  deed  from  a  Tficrrtgage  to  an 
absolute  conveyance,  and  is  a  release  of  the  right  to  redeem  so 
that  the  mortgagee  became  seized  in  fee  simply  by  a  union  of  the" 
estates  of  the  mortgagor  and  mortgagee  discharged  of  the  mortgage^ 
the  defence  to  the  action  is  perfect.  It  cannot  be  claimed  that  the 
written  paper  ex  propria  ingore  cmitd  have  that  effect.  It  does  not 
profess  to  release  the  right  of  redemption  or  to  convey  any  lands 
or  interest  in  lands.  No  lands  in  particular  are  referred  tc.  No 
agreement  can  be  spelled  out  of  the  instrument  which  could  be 
specifically  performed,  and  it  could  not  be  aided  and  made  a  perfect 
contract  to  release  or  convey  lands  by  parol  proof.  The  whole- 
force  of  the  transaction,  as  affecting  the  rights  of  the  plaintiff,  is  in 


ODELL    V.    MONTROSS  405 

the  payment  and  receipt  of  the  fifty  dollars  with  intent  to  extin- 
guish the  title  of  the  plaintiff.  This  cannot  operate  as  an  estoppel 
or  take  the  case  out  of  the  statute  of  frauds.  The  mere  payment  of 
money  will  not  entitle  a  purchaser  to  a  specific  performance  of  a 
parol  contract  for  the  purchase  of  an  interest  in  lands.  That  can  be 
repaid  with  interest,  and  no  damage  ensues  from  the  non-perform- 
ance of  the  contract.  The  purchaser  can  be  made  good  for  the  use 
of  his  money,  which  is  all  that  he  has  lost.  Had  the  defendant, 
acting  upon  the  faith  of  this  transaction,  entered  into  possession 
of  the  premises  and  incurred  expenses,  and  substantially  changed 
his  situation  so  that  he  could  not  be  placed  in  the  same  situation 
in  which  he  was  before,  it  might  have  estopped  the  plaintiff  from 
taking  shelter  under  the  statute  of  frauds,  or  alleging  the  insuffi- 
ciency of  the  written  instrument  to  carry  out  the  agreement  and 
intent  of  the  parties.  But  there  are  none  of  the  elements  of  an 
eciuitable  estoppel  in  the  case  as  presented  by  the  record.  ^ 

The  plaintiff  having  a  recognized  legal  estate  in  fee,  he  could  only 
be  divested  of  it  (except  by  way  of  estoppel  which  does  not  exist)  by 
some  instrument  which  would  be  valid  under  the  statute  of  frauds 
and  in  compliance  with  the  statute  prescribing  the  mode  and  man- 
ner of  conveying  lands.  The  statute  of  frauds  (2  R.  S.  135,  §  8)  is 
very  explicit,  and  needs  no  interpretation  in  its  application  to  this  i 
case.  It  declares  that  every  contract  for  the  sale  of  any  lands  or  1 
any  interest  in  lands  shall  be  void  unless  in  writing  and  subscribed 
by  the  party  by  whom  the  sale  is  to  be  made.  The  whole  contract, 
that  is,  the  agreement  to  sell  and  the  description  of  the  lands  or  the 
interest  in  lands  agreed  to  be  sold,  must  be  in  writing  and  subscribed 
by  the  party.  The  other  statute  referred  to  (1  R.  S.  738,  §  137)  is 
ecjually  applicable  to  this  case.  To  hold  that  the  plaintiff  had  not 
a  fee,  would  be  to  overthrow  the  well-established  relation  of  mort- 
gagor and  mortgagee  and  reverse  their  respective  positions  in 
respect  of  the  legal  estate  in  the  lands  mortgaged.  The  statute  de- 
clares that  every  grant  in  fee  or  of  a  freehold  estate  shall  be  sub- 
scribed and  sealed  by  the  person  making  the  grant  or  his  lawful 
agent.  If  a  seal  only  was  wanting  to  make  the  instrument  relied 
upon  by  the  defendant  valid  for  the  purposes  intended,  it  is  possible 
the  court  might  compel  the  sealing,  but  that  would  not  supply  the 
intrinsic  defects  of  the  paper-writing  itself. 

What  is  said  in  Stoddard  v.  Whiting,  46  N.  Y.  633,  of  the  nature 
of  the  estate  of  a  mortgagor  and  the  bearing  of  the  statutes  quoted 
upon  a  conveyance  of  his  estate,  was  not  necessary  to  the  decision 
-of  the  case  or  necessarily  adjudged  by  the  court.    The  plaintiff 


406  EQUITY    RELATIONS 

there,  who  was  enforcing  an  equity  of  redemption,  which  was  re- 
sisted, claimed  under  a  written  but  unsealed  assignment  (a  parol 
writing)  from  the  mortgagor,  and  that  was  held  sufficient  to  give 
him  a  standing  in  court  and  enable  him  to  maintain  the  equitable 
action  to  redeem.  The  decision  is  not  in  conflict  with  the  views 
here  expressed.  The  defendant  could  have  acquired  the  estate  and 
interest  of  the  plaintiff  either  by  a  deed-poll,  as  a  release  or  a  grant, 
in  any  form  sufficient  in  terms  and  mode  of  execution  to  convey  an 
estate  in  lands.  Mr.  Powell,  in  his  treatise  on  mortgages,  vol.  1, 
p.  260,  in  speaking  of  the  methods  by  which  a  mortgagee  may 
acquire  the  interest  of  the  mortgagor,  says  that  it  may  be  by  inden- 
ture with  covenants  or  a  release  by  deed-poll,  for  by  that  means  the 
estate  of  the  mortgagor  and  mortgagee  will  become  merged,  and  the 
mortgagee  will  be  owner  in  fee  of  the  whole  estate. 

The  rights  of  the  mortgagor  and  his  estate  can  only  be  foreclosed 
by  due  process  of  law,  or  a  release  by  deed  in  proper  form,  or  a 
conveyance  sufficient  to  pass  the  title  to  an  estate  in  fee.  The 
defendant  has  not  purchased  the  equity  of  redemption  or  acquired 
the  estate  of  the  plaintiff  by  any  proper  release  or  conveyance.  No 
injustice  will  be  done  the  defendant  by  the  result  to  which  this 
conclusion  leads.  He  will  receive  his  money  and  interest,  and  will 
be  fully  indemnified,  and  he  is  not  entitled  to  speculate  in  his  deal- 
ings with  his  mortgage-debtor. 

The  judgment  of  the  Special  Term  might  have  directed  a  re- 
demption, upon  the  proper  terms,  within  a  specified  time,  or  in 
default  thereof  the  plaintiff  be  foreclosed.  That,  I  think,  would 
have  been  the  proper  judgment.  But  as  no  fault  is  found  with  the 
terms  of  the  judgment  at  Special  Term,  the  judgment  of  the  General 
Term  should  be  reversed  and  that  of  the  Special  Term  affirmed. 

All  concur,  except  Rapallo,  J.,  not  voting. 

Judgment  accordingly.^ 

^Accord,  Reich  v.  Dyer,  91  App.  821.  But  cf.  Luesenhop  v.  Eins- 
Div.  (N.  Y.)  240  (1904);  Conover  v.  feld,  93  App.  Div.  (N.  Y.)  68,  73 
Palmer,  123  App.  Div.  (N.  Y.)  817,       (1904). 


CHAPTER  II     (Continued) 

Section  III — Agreements  for  Collateral  Advantage — 
Clogging  The  Equity  of  Redemption 


JENNINGS  V.  WARD 

High  Court  of  Chancery,  1705 

(2  Vern.  520) 

The  defendant  Ward  lends  money  to  Neale,  the  groom  porter,  to 
carry  on  his  buildings  in  Cock  and  Pye  fields,  and  took  a  mortgage 
from  him  to  secure  sixteen  thousand  pounds  with  interest  at  £6  per 
cent.,  and  in  another  deed,  executed  at  the  same  time,  took  a  cove- 
nant from  Neale  that  he  should  convey  to  the  defendant,  if  he 
thought  fit,  ground  rents  to  the  value  of  sixteen  thousand  pounds, 
at  the  rate  of  twenty  years'  purchase.  The  bill  being  to  redeem, 
the  defendant  insisted  on  that  agreement;  but  the  Master  of  the 
Rolls  [Sir  J.  Trevor]  decreed  a  redemption,  on  payment  of  prin- 
cipal, interest  and  costs,  without  regard  to  that  agreement;  but  set 
aside  the  same  as  unconscionable.  A  man  shall  not  have  interest 
for  his  money,  and  a  collateral  advantage  besides  for  the  loan  of  it, 
or  clog  the  redemption  with  any  by-agreement. 


ORBY  V.  TRIGG 

High  Court  of  Chancery,  1822 

(9  Mod.  Rep.  2) 

V 

The  brother  of  the  now  plaintiff  mortgaged  his  lands  to  the  de- 
fendant, and  afterwards  died.  In  the  deed  of  mortgage  there  was  a  I 
covenant  to  reconvey  upon  six  months'  notice  of  the  payment  of  the 
principal  sum  and  interest;  and  another  covenant  that,  in  case  the 
estate  was  to  be  sold,  the  mortgage  should  have  the  pre-emption. 
After  the  death  of  the  brother,  who  was  the  mortgagor,  his  widow 
delivered  up  the  counterpart  of  the  mortgage  to  the  attorney  of  the 
mortgagee. 

407 


408  EQUITY    RELATIONS 

The  plaintiff  having  given  the  defendant  six  months'  notice  that 
he  would  pay  the  principal  and  interest,  and  having  it  ready  to  pay, 
the  defendant  refused  to  accept  it.  The  plaintiff  thereupon  ex- 
hibited his  bill  for  a  reconveyance  of  the  estate,  having  entered  into 
articles  with  a  purchaser  for  the  sale  thereof.  The  defendant,  l)y 
his  answer,  insisted  on  the  covenant  in  the  deed  to  have  the  pre- 
emption. 

But  it  appearing  that  neither  the  plaintiff  nor  the  purchaser  knew 
anything  of  this  covenant,  for  that  the  counterpart  of  the  mortgage 
was  delivered  up  as  aforesaid ;  and  that  the  plaintiff  had  often  made 
application  to  the  mortgagee  for  a  copy  thereof,  which  was  as  often 
denied,  he  insisting  only  to  have  the  principal  and  interest  paid, 
for  that  the  security  was  too  narrow  for  the  money  which  he  had 
lent;  and  that  if  it  was  not  paid  by  such  a  time,  he  would  foreclose 
the  equity  of  redemption,  but  never  mentioned  that  he  was  to  have 
the  benefit  of  pre-emption  until  after  the  estate  was  sold ;  therefore 
he  ought  not  now  to  claim  it,  to  the  prejudice  of  the  purchaser  and 
of  the  plaintiff,  having  so  long  time  for  that  purpose  before  the 
estate  was  sold. 

And  it  was  decreed  accordingly,  and  the  mortgagee  to  reconvey 
upon  payment  of  the  principal  and  interest,  &c. 


BROAD   V.   SELFE 

Court  of  Chancery,  1863 

(11  Weekhj  Rep.  1036) 

This  was  a  forpHosure  suit.  The  plaintiffs  prayed  an  account  of 
what~was  due  to  them  for  principal  moneys  and  interest,  commis- 
sion and  expenses,  under  the  agreement  hereinafter  set  forth;  pay- 
ment by  the  defendant  of  the  amount  so  to  be  found  due,  or,  in 
default,  foreclosure. 

It  appeared  that  in  June,  1861,  the  plaintiffs  lent  to  the  defendant 
£200  on  his  promissoiy  note,  which  was  due  in  the  September  fol- 
lowing, but  was  dishonored.  On  the  30th  of  September,  1861,  the 
defendant  gave  to  the  plaintiffs  a  new  promissory  note  for  the  same 
amount,  and  also  signed  a  Memorandum  of  Agreement,  as  follows: 

"Memorandum  of  Agreement  made  this  30th  day  of  September, 
1861,  between  Peter  Broad  and  Taylor  Pritchard,  of  28  Poultry,  in 
tie  city  of  London,  auctioneers,  and  John  "Selfe,  of  Surbiton  Hill,  in 
the  county  of  Surrey.    Whereas,  in  consideration  of  the  said  Peter 


BROAD    V.    SELFE  409 

Broad  and  Taylor  Pritchard  advancing  to  the  said  John  Selfe  the 
sum  of  £200  upon  the  security  of  a  piece  or  parcel  of  land  known 
as  'The  Park,'  Surbiton  Hill,  &c.,  the  said  John  Selfe  hereby  au- 
thorizes and  instructs  the  said  Peter  Broad  and  Taylor  Pritchard  to 
sell  and  dispose  of  the  whole  or  any  portion  of  the  land  as  above 
named,  either  by  private  or  public  sale,  at  and  for  the  best  price  that 
can  be  obtained;  and  further,  to  repay  themselves  out  of  the  pro- 
ceeds of  such  sale  the  said  sum  of  £200,  with  interest  at  the  rate  of  o 
per  cent,  per  annum  from  the  date  hereof,  with  a  commission  of  5 
per  cent,  on  the  amount  realized,  and  the  expenses  attending  the 
sale  thereof;  and  in  the  event  of  the  said  John  Selfe  repaying  the 
said  Peter  Broad  and  Taylor  Pritchard  the  aforesaid  sum  of  £200 
and  interest,  the  said  John  Selfe  shall  pay  to  the  said  Peter  Broad 
and  Taylor  Pritchard  a  commission  of  5  per  cent,  on  the  value  of 
the  said  property,  together  with  all  the  expenses  incuiTed  bj'  them, 
whether  the  property  or  any  portion  thereof  is  sold  by  any  other 
agency  or  retained  by  the  said  John  Selfe.  The  said  John  Selfe 
further  undertakes  to  execute  a  legal  mortgage  of  the  above- 
mentioned  lands  and  buildings  to  the  said  Peter  Broad  and  Taylor 
Pritchard  at  his  own  expense  whenever  called  upon  by  them  so  to 
do,  such  mortgage  to  contain  all  the  usual  and  customary  cov- 
enants, and  particularly  power  of  sale,  either  by  private  contract 
or  public  auction." 

The  plaintiffs,  in  pursuance  of  the  authority  given  to  them  by 
the  agreement,  made  all  the  necessary  arrangements  for  proceeding 
to  a  sale  of  the  premises  mentioned  in  the  Memorandum,  and  in 
so  doing  incurred  considerable  expense;  but  in  February,  1862,  the 
defendant  gave  the  plaintiffs  notice  that  he  revoked  the  authority 
so  given,  and  the  premises  were  accordingly  not  sold.  The  value 
of  the  property  was  about  £8,000.  The  plaintiffs  applied  to  the 
defendant  for  payment  of  the  principal,  interest,  and  5  per  cent, 
commission  (£400),  and  expenses,  which  they  alleged  to  be  due 
to  them;  but  the  defendant  declined  to  recognize  their  claim  to  the 
5  per  cent,  commission,  and  in  March,  1862,  the  defendant  tendered 
to  the  plaintiffs  the  sum  of  £200  and  interest,  and  £15  for  any 
expenses  the  plaintiffs  might  have  incurred  in  the  matter. 

The  present  suit  was  afterwards  instituted,  and  the  cause  now 
came  on  upon  motion  for  decree. 

The  Master  of  the  Rolls  [Lord  Romilly]  said  the  contract 
in  this  case  w^as  only  a  contract  of  mortgage  to  the  extent  of  £200 
principal,  and  the  interest  upon  it;  but  not  beyond  this.     His 


410  EQUITY   RELATIONS 

kHonour  thought  that  the  cases  referred  to  by  Mr.  Roberts,  and 
Iseveral  others  which  he  had  consulted,  showed  the  principle  that 
Ithe  Court  would  not  permit  a  person,  under  the  colour  of  a  mort- 
Igage,  to  obtain  a  collateral  advantage  not  belonging  or  appurtenant 
Ijfi  the  contract  of  mortgage.  Although  this  principle,  in  its  origin, 
probably  had  reference  to  the  usury  laws,  it  went,  in  his  Honour's 
opinion,  beyond  them,  and  was  not  affected  by  their  repeal.  The 
remedies  of  foreclosure  and  redemption  were  co-extensive,  and  it 
was  clear  that  if  the  mortgagor  had  come  to  redeem  the  security, 
he  would  have  been  allowed  to  do  so  on  payment  of  the  principal 
sum  of  £200,  interest,  and  costs,  and  then  his  Honour  would  have 
had  to  consider  whether,  under  the  recent  Act  of  Parliament,  the 
Court  could  not  direct  an  inquiry  as  to  what  was  properly  due  to 
the  mortgagees  in  respect  of  services  rendered  as  to  the  property 
under  the  agreement  entered  into  between  them  and  the  mort- 
gagor. The  case  was  the  same  in  foreclosure.  Therefore,  in  mak- 
ing the  usual  foreclosure  decree,  his  Honour  proposed  to  direct 
a  reference  to  chambers,  to  inquire  what  (if  anything)  was  due 
to  the  plaintiffs  in  respect  of  expenses  and  services  rendered  by 
them  under  the  agreement.  With  regard  to  the  question  of  costs, 
generally  speaking,  in  foreclosure  suits,  the  mortgagee  added  his 
costs  to  his  security;  but  it  was  equally  clear  that  where  the  mort- 
gagor had  tendered  his  mortgage-money  and  interest  prior  to  the 
suit,  if  the  mortgagee  came  to  foreclose,  he  roust  pay  the  costs 
of  the  suit.  Here,  no  doubt,  a  tender  had  been  made  of  the  £200 
principal  and  interest,  and  £15  for  expenses,  which  the  plaintiffs 
did  not  consider  enough,  and  refused  to  accept.  It  was,  how- 
ever, to  be  remembered  that  the  defendant  had  entered  into  this 
contract  with  the  plaintiffs  to  pay  them  a  commission  with  his  eyes 
open ;  and,  although  this  was  a  contract  which  the  Court  could  not 
enforce  by  reason  of  want  of  mutuality — the  Court  not  being  able 
to  compel  the  plaintiffs  to  perform  the  sevices  required  by  the  agree- 
ment— yet,  as  the  defendant  entered  into  this  contract,  he  could 
not  claim  the  same  benefit  from  the  tender  which  he  might  have 
done  in  a  case  of  ordinary  mortgage.  The  Court,  therefore,  could 
not  give  him  the  costs  of  the  suit.  Neither  were  the  plaintiffs 
entitled  to  the  costs  of  the  suit,  because  they  did  not  come  simply 
to  enforce  a  mortgage  security,  but  they  came  to  enforce  what  the 
Court  considered  they  were  not  entitled  to  enforce.  There  would, 
accordingly,  be  no  costs  on  either  side  up  to  the  hearing.  An 
account  would  be  directed  of  what  was  due  to  the  plaintiffs  for 
the  principal  sum  of  £200  and  interest  at  £5  per  cent.,  and  the 


BIGGS   V.    HODDINOTT  411 

mortgagee's  costs  other  than  the  costs  of  the  suit,  with  the  usual 
foreclosure  decree.  An  inquiry  what,  if  anything,  was  due  to  the 
plaintiffs  in  respect  of  expenses  incurred  and  services  rendered  in 
relation  to  the  property  mentioned  in  the  Memorandum  of  Agree- 
ment, and  further  consideration  on  that  part  of  the  case  and  the 
future  costs,  would  be  reserved.^ 


BIGGS  V.   HODDINOTT 

Supreme  Court  of  Judicature — Chancery  Division,  1898 

(L.  R.  [1898]  2  Ch.  307) 

Motion  and  Adjourned  Summons. 

The  plaintiff  Biggs  was  a  brewer  at  Cardiff,  the  defendants  Hod- 
dinott  were  the  owners  of  the  Witchill  Hotel,  Cadoxton,  Glamor- 
ganshire, in  which  they  carried  on  their  business  as  hotel  keepers. 
The  plaintiff  had  a  mortgage  on  the  hotel  for  £7654,  which  was 
secured  by  an  indenture  of  March  18,  1896,  by  which  the  defend- 
ants covenanted,  in  the  usual  way,  for  payment  of  the  principal, 
with  interest  at  £5  per  cent.,  on  September  18  next.  This  deed 
also  contained  a  joint  and  several  covenant  by  the  defendants 
that  "they,  their  respective  executors,  administrators,  and  as- 
signs, owners,  or  tenants  for  the  time  being  of  the  said  premises, 
will  during  the  continuance  of  this  security  take  of  and  deal  with 
the  plaintiff,  his  executors,  administrators,  or  assigns  only  for  all 
beers  and  stout  or  any  other  description  of  malt  liquors  (except 
bottled  beers)  which  shall  be  vended  to  be  consumed  on  or  off 
the  said  hotel  and  premises;  and  while  any  money  is  owing  on  the 
security  of  these  presents  deal  exclusively  with  the  plaintiff, 
his  executors,  administrators  and  assigns  for  all  malt  liquors  as 
aforesaid  sold  thereupon  or  upon  any  premises  taken  or  used  in 
connection  therewith,  or  in  anywise  under  or  by  virtue  of  the  li- 
cense or  licenses  now  existing  or  being  in  force  in  respect  of  the 
same  premises,  including  any  occasional  or  subsidiary  license,  and 
will  not  sell  or  permit  the  sale  or  consumption  upon  the  said  prem- 
ises of  any  such  liquors  as  aforesaid  (except  bottled  beers),  other 
than  such  as  shall  have  been  purchased  or  taken  of  the  plaintiff', 
his  administrators  or  assigns."    There  was  a  proviso  that  "if  the 

1  Salt  V.  Marquess  of  Northampton  accord.  See,  also,  VUas  v.  McBride, 
[1892],  App.  Cas.  1  (1891);  In  re  62  Hun  (N.  Y.),  324  (1891),  aff'd 
Edwards'  Estate,  11  Ir.  Ch.  367  (1861),       short,  136  N.  Y.  634  (1892). 


412  EQUITY   RELATIONS 

defendants,  their  executors,  administrators,  and  assigns  shall 
observe  fully  and  in  all  respect  the  covenants  on  their  part  herein- 
before contained,"  then  the  plaintiff  would  not  call  in  the  loan  for 
five  years.  The  deed  also  contained  a  proviso  that  notwithstand- 
ing the  proviso  for  redemption,  the  defendants  should  not  be  en- 
titled to  require  or  compel  the  plaintiff  to  receive  his  principal 
before  the  expiration  of  five  years  from  the  date  of  the  deed.  The 
plaintiff  also  covenanted  with  the  defendants  during  the  continu- 
ance of  the  security  to  supply  them  with  beer  and  stout  or  other 
malt  liquors  of  the  usual  quality  at  certain  scheduled  prices;  but 
the  deed  in  no  way  charged  any  money  payable  for  beer,  &c.,  upon 
the  mortgaged  premises. 

In  the  spring  of  1898  the  defendants  ceased  to  purchase  their  beer 
and  stout  fi-om  the  plaintiff,  and  intimated  that  they  did  not  in- 
tend to  purchase  any  more  malt  liquors  from  him,  as  they  \yere 
advised  that  they  were  not  })ound  by  the  covenant  to  do  so;  and 
they  also  claimed  to  be  entitled  to  redeem  the  mortgage  at  once. 

On  May  4,  1898,  the  defendants  tendered  to  the  plaintiff  the 
amount  of  his  principal  and  interest  to  date,  with  a  further  sum  for 
six  months'  interest  in  lieu  of  notice;  but  the  plaintiff  declined  to 
accept  it. 

On  May  10  the  mortgagors  took  out  an  originating  summons 
against  the  mortgagee  to  compel  redemption. 

On  May  23  the  plaintiff  commenced  this  action,  claiming  an  in- 
junction restraining  the  defendants  during  the  continuance  of  the 
mortgage,  their  servants  or  agents,  from  selling  or  permitting  the 
sale  or  consumption  upon  the  Witchill  Hotel  of  any  beer,  stout,  or 
other  malt  liquors  (other  than  bottled  beers),  which  shall  not  have 
been  purchased  and  taken  from  the  plaintiff,  and  for  damages. 

The  plaintiff  moved  before  Romer,  J.,  on  June  10,  1898,  for  an 
interim  injunction  in  the  terms  of  his  claim.  The  defendants'  sum- 
mons for  redemption  was  adjourned  into  court,  and  came  on  for 
hearing  with  the  motion. 

Romer,  J.^  There  is  a  great  principle  which  I  think  ought  to 
be  adhered  to  by  this  Court,  and  by  every  Court  where  it  can 
possibly  do  so;  that  is  to  say,  that  a  man  shall  abide  by  his  con- 
tracts, and  that  a  man's  contracts  should  be  enforced  as  against 
him.  Undoubtedly  there  are  certain  principles  of  equity,  especially 
those  relating  to  mortgagors  and  mortgagees,  which  have  to  a  cer- 
tain extent  interfered  with  that  general  principle,  and  with  those 

*  Portions  of  opinions  omitted. 


BIGGS    V.    HODDINOTT  413 

cases  I  shall  have  to  deal.  But  before  I  do  so  I  wish  in  the  first 
place  to  point  out  that,  unless  there  is  some  doctrine  of  equity 
which  would  otherwise  prevent  me  enforcing  the  covenant  here, 
the  covenant  is  one  which  in  my  opinion  ought  to  be  enforced; 
that  is  to  say,  looking  at  the  circumstances  (and  there  is  no  ev- 
idence before  me  which  alters  the  circumstances  as  appearing  on 
the  face  of  the  mortgage  deed  itself)  it  appears  to  me  that  the  trans- 
action entered  into  was  a  reasonable  and  proper  one.  The  cov- 
enants entered  into  by  the  mortgagors  and  the  mortgagee  with 
reference  to  the  supply  and  purchase  of  beer  appear  to  me  to  have 
been  reasonable  and  entered  into  in  good  faith,  and  are  in  no  sense 
oppressive  upon  the  mortgagors.  Unless,  therefore,  there  is  some 
principle  of  equity  affecting  mortgagors  and  mortgagees  which 
prevents  me  from  enforcing  this  covenant,  I  ought  to  enforce  it. 
I  should  be  very  sorry  indeed  if  I  found  there  was  any  such  piin- 
ciple;  and  on  considering  the  principles  to  which  my  attention  has 
been  called,  and  the  authorities  bearing  upon  them,  I  am  glad  to 
say  that  I  do  not  think  there  is  any  principle  or  any  authority 
which  prevents  me  from  enforcing  this  covenant  as  against  the 
mortgagors. 

Now,  there  is  a  principle  which  I  will  accept  without  any  quaUfi- 
cation  for  the  purpose  of  my  present  judgment  (although  possibly 
even  that  principle  might  have  to  be  considered  narrowl}^  with 
reference  to  special  cases)  that  on  a  mortgage  you  cannot,  by  con- 
tract between  the  mortgagor  and  mortgagee,  clog,  as  it  is  termed, 
the  equitj^  of  redemption,  so  as  to  prevent  the  mortgagor  from 
redeeming  on  payment  of  principle,  interest,  and  costs.  Of  course, 
I  mean  redeeming  at  the  time  agreed  upon  between  the  parties  for 
redemption. 

Does  that  principle  apply  to  the  case  before  me  so  as  to  prevent 
this  covenant  by  the  mortgagors  from  being  enforced  against  them? 
I  am  clearly  of  opinion  that  it  does  not.  There  is  nothing  in  this 
covenant  which  clogs  the  equity  of  redemption.  The  mortgagors' 
right  to  redeem  under  the  mortgage  deed  stands  exactly  the  same 
whether  this  covenant  to  take  the  beer  from  the  brewer,  the  mort- 
gagee, is  in  the  deed  or  not.  The  mortgagee  by  virtue  or  in  respect 
of  that  covenant  has  no  right  to  stop  or  check  redemption.  He 
could  not  stop  redemption  because  there  had  been  any  breach  of 
that  covenant.  There  is  no  charge  upon  the  mortgaged  premises 
in  favour  of  the  mortgagee  for  any  sums  which  might  become  due 
to  him  under  or  by  virtue  or  by  reason  of  any  breach  of  that  cov- 
enant by  the  mortgagors.     It  therefore  appears  to  me  impossible 


414  EQUITY   RELATIONS 

to  say  that  this  covenant  in  any  way  interferes  with  the  principle 
about  not  clogging  the  equity  of  redemption.  But  then  it  is  said 
on  behalf  of  the  mortgagors  that  there  is  a  much  larger  principle 
which  would  prevent  this  covenant  from  being  held  binding  on 
them,  and  they  say  that  the  principle  is  stated  in  the  case  of  Jen- 
nings v.  Ward,  2  Vern.  520,  which  is  a  well-known  authority,  where 
the  Master  of  the  Rolls  undoubtedly  said  that  a  man  shall  not  have 
interest  for  his  money  and  a  collateral  advantage  besides  for  the 
loan  of  it,  or  clog  the  redemption  with  any  by-agreement.  I  have 
already  dealt  with  the  question  of  clogging  the  redemption.  It  is 
said  that  the  observations  of  the  Master  of  the  Rolls  are  to  be 
taken  to  their  fullest  extent,  and  that  in  every  case  it  is  to  be  taken 
that  a  mortgagee  shall  not  have  interest  for  his  money  and  a 
collateral  advantage  besides  for  the  loan. 

Now,  I  must  say  it  appears  to  me  always  a  good  principle  in  deal- 
ing with  general  observations  to  bear  in  mind  the  case  in  which 
those  observations  were  made,  and  with  reference  to  what  circum- 
stances they  were  made.  And  when  I  turn  and  look  at  the  circum- 
stances of  Jennings  v.  Ward,  2  Vern.  520,  two  things  appear.  In 
the  first  place,  the  Master  of  the  Rolls  was  dealing  in  fact  with  a 
case  where  a  mortgagor  came  to  redeem,  and  it  was  sought  to  clog 
his  redemption  by  saying  that  there  was  a  collateral  agreement 
with  regard  to  other  property  which  ought  to  prevent  his  being 
allowed  to  redeem.  It  was,  in  fact,  a  case  of  clogging  the  equity  of 
redemption.  But  beyond  that,  when  you  look  and  see  what  was 
the  collateral  agreement  in  question  there,  it  is  to  be  observed  it 
was  one  about  which  the  Master  of  the  Rolls  said  that  it  must  be 
set  aside  as  unconscionable.  So  that  it  was  a  case  where  the 
collateral  agreement  was  unconscionable  in  itself,  and  it  was  in 
reference  to  a  case  like  that  that  the  Master  of  the  Rolls  made  the 
observation  that  he  did. 

Putting  aside  questions  of  usury,  and  putting  aside  contracts 
which  are  oppressive,  or  which  are  exactions  that  a  mortgagee  is  not 
allowed  to  make,  I  see  no  reason  v^hy  a  contract  between  mort- 
gagor and  mortgagee,  entered  into  in  good  faith  as  a  reason  for  the 
mortgagee  advancing  his  money,  should  not  stand  and  receive  the 
support  of  this  Court,  subject  to  the  limitation  I  have  already 
pointed  out  as  to  clogging  the  equity  of  redemption.  It  appears  to 
me,  notwithstanding  some  observations  that  you  may  find,  espe- 
cially some  made  by  Kay,  J.,  in  some  of  his  decisions,  which  I 
think  ought  to  be  interpreted  by  reference  to  the  special  facts  of  the 
cases  in  which  those  observations  were  made,  it  is  not  true  to  say 


BIGGS    V.    HODDINOTT  415 

that  in  every  contract  for  a  mortgage,  every  provision  is  void 
whereby  a  mortgagee  gets  more  than  the  principal  he  advances, 
and  his  interest  and  costs.  I  think  there  is  no  objection  (within 
the  Hnes  I  have  mentioned)  to  an  advantage  being  derived  by  a 
mortgagee  in  his  contract  at  the  time,  and  as  a  term  of  the  advance. 
Where  such  an  advantage  is  part  of  the  consideration  for  the  ad- 
vance, and  the  mortgagor  has  the  benefit  of  the  advance,  he  is 
-prima  facie  bound  by  it,  unless  he  can  bring  himself  within  some  of 
the  limitations  laid  down  by  the  cases  to  which  I  have  already 
referred. 

Finding,  therefore,  as  I  do  in  the  result,  an  honest  bargain 
entered  into,  the  benefit  of  which  has  been  obtained  by  the  mort- 
gagors, and  finding,  as  I  am  glad  to  say  and  as  I  think,  no  prin- 
ciple or  authority  which  prevents  me  from  enforcing  this  contract 
on  the  mortgagors'  part,  I  enforce  it  accordingly,  and  therefore 
grant  the  injunction  in  the  terms  of  the  notice,  limiting  it  according 
to  those  terms  during  the  continuance  of  the  security;  and  the 
defendants,  of  course,  must  pay  the  costs. 

C.  A. 

The  defendants  appealed  from  the  order  on  the  motion. 

I'lNDLEY,  M.  R.  We  have  listened  to  a  very  ingenious  and 
learned  argument  with  the  view  of  inducing  us  under  pressure  to 
lay  down  a  proposition  of  law  which  would  be  very  unfortunate  for 
business  men.  The  proposition  contended  for  comes  to  this — that 
while  two  people  are  engaged  in  a  mortgage  transaction  they  can- 
not enter  into  any  other  transaction  with  each  other  which  can 
possibly  benefit  the  mortgagee,  and  that  any  such  transaction  must 
be  before  or  after  the  mortgage,  and  be  independent  of  it,  so  that  it 
cannot  be  said  that  the  mortgagee  got  any  additional  benefit  from 
the  mortgage  transaction.  Mr.  Farwell  did  not  attempt  to  uphold 
this  on  any  rational  principle,  but  relied  on  authority.  Of  course, 
we  must  follow  settled  authorities  whether  we  like  them  or  not;  but 
do  they  support  this  proposition?  Jennings  v.  Ward,  2  Vern.  520, 
was  the  first  case  relied  upon.  That  was  a  redemption  suit,  and  the 
stipulation  which  was  in  question  seriously  interfered  with  the 
redemption  of  the  mortgaged  property,  and  the  Master  of  the  Rolls 
(Sir  J,  Trevor)  decreed  redemption  without  regard  to  that  stipula- 
tion. He  is  reported  to  have  said:  "A  man  shall  not  have  interest 
for  his  money,  and  a  collateral  advantage  besides  for  the  loan  of  it, 
or  clog  the  redemption  with  any  by-agreement."  That  has  been 
understood  as  meaning  exactly  what  was  said,  without  regard  to 


416  EQUITY   RELATIONS 

the  circumstances  of  the  case,  and  has  found  its  way  into  the  text- 
books as  establishing  that  a  mortgagee  cannot  have  principal, 
interest,  and  costs,  and  also  some  collateral  advantage.  But  that 
supposed  rule  has  been  departed  from  again  and  again.  Take  the 
case  of  West  India  mortgages:  it  has  been  repeatedly  decided  that 
the  mortgagee,  if  not  in  possession,  may  stipulate  that  he  shall  be 
appointed  consignee.  The  proposition  stated  in  Jennings  v.  Ward, 
2  Vern.  520,  is  too  wide.  If  properly  guarded  it  is  good  law  and 
good  sense.  A  mortgage  is  regarded  as  a  security  for  money,  and 
the  mortgagor  can  always  redeem  on  payment  of  principal,  interest, 
and  costs;  and  no  bargain  preventing  such  redemption  is  valid,  nor 
will  unconscionable  bargains  be  enforced.  There  is  no  case  where 
collateral  advantages  have  been  disallowed  which  does  not  come 
under  one  of  these  two  heads.  To  say  that  to  require  such  a  cov- 
enant as  that  now  in  question  is  unconscionable  is  asking  us  to  lay 
down  a  proposition  which  would  shock  any  business  man,  and  we 
are  not  driven  to  it  by  authority.  The  proposition  laid  down  by 
Hargreave,  J.,  in  In  re  Edwards's  Estate,  11  Ir.  Ch.  Rep.  367,  that 
where  an  onerous  contract  entered  into  by  a  mortgagor  with  his 
mortgagee  is  part  of  the  arrangement  for  the  loan,  and  is  actually 
inserted  in  the  mortgage  deed,  it  is  presumed  to  be  made  under 
pressure,  and  is  not  capable  of  being  enforced,  goes  too  far,  though 
the  decision  of  the  learned  judge  was  correct;  for  the  stipulation 
with  which  he  had  to  deal  was  unreasonable,  and  one  which  ought 
not  to  be  enforced.    The  appeal  will  be  dismissed. 

I  Chitty,  L.  J.  The  mortgage  here  is  a  mortgage  of  a  public 
house  for  a  time  certain  by  publicans  to  a  brewer,  effected  in  the 
usual  way,  and  it  contains  a  covenant  by  the  mortgagors  during  the 
continuance  of  the  secmity  to  take  all  their  beer  from  the  mort- 
gagee, and  a  covenant  by  the  mortgagee  to  supply  it.  It  is  con- 
tended that  the  covenant  by  the  mortgagors  is  void  in  equity.  The 
first  objection  I  have  to  make  is  that  it  in  no  way  affects  the  equity 
of  redemption,  for  it  is  not  stipulated  that  damages  for  breach  of 
the  covenant  shall  be  covered  by  the  security,  and  redemption 
takes  place  quite  independently  of  the  covenant;  so  this  is  not  a 
case  where  the  right  to  redeem  is  ajffected.  Equity  has  always 
looked  upon  a  mortgage  as  only  a  security  for  money,  and  here  the 
right  of  the  mortgagors  to  redeem  on  payment  of  principal,  interest 
and  costs  is  maintained.  It  has  been  contended  that  the  principle 
is  established  by  the  authorities  that  a  mortgagee  shall  not  stipu- 
late for  any  collateral  advantage  to  himself.    I  think  the  cases  only 


SANTLEY    V.    WILDE  417 

establish  that  the  mortgagee  shall  not  impose  on  the  mortgagorl 
an  unconscionable  or  oppressive  bargain.    The  present  appears  tol 
me  to  be  a  reasonable  trade  bargain  between  two  business  men  who 
enter  into  it  with  their  eyes  open,  and  it  would  be  a  fanciful  doc- 
trine of  equity  that  would  set  it  aside. 

It  is  unnecessary  to  say  more:  the  covenant  in  this  case  is  not 
avoided  by  any  such  supposed  rule  of  equity  as  has  been  contended 
for. 

Collins,  L.  J.  I  am  of  the  same  opinion.  Apart  from  au- 
thority, no  one  would  say  that  this  stipulation  was  invalid,  for 
it  seems  a  reasonable  and  businessUke  one.  But  it  is  said  that  mort- 
gages are  subject  to  a  long  series  of  decisions,  and  no  doubt  equity 
judges  have  tried  to  lay  down  some  principle  which  would  explain 
satisfactorily  the  decisions  of  their  predecessors  and  account  for 
their  own,  but  in  so  doing  they  have  sometimes  laid  down  piinciples 
which,  when  applied  to  other  cases,  are  too  wide.  The  fact  is  that 
those  decisions  were  given  in  particular  hard  cases,  and  judges  have 
afterward  endeavored,  not  always  successfully,  to  reduce  them  to  a 
general  rule. 

On  what  principle  can  any  stipulation  in  a  mortgage  deed  which 
does  not  fetter  the  right  of  redemption  be  held  invalid?  I  think 
only  on  the  general  principle  that  effect  will  not  be  given  to  what  is 
unconscientious  and  oppressive.  No  narrower  principle  will  work. 
Here  the  provision  is  reasonable  and  does  not  fetter  the  equity  of 
redemption.  The  wide  proposition  in  Jennings  v.  Ward,  2  Vern. 
520,  was  not  necessary  for  the  decision  in  that  case,  and  there  is 
nothing  in  this  case  to  bring  it  within  that  decision.  •  The  mere 
fact  that  a  stipulation  for  the  benefit  of  the  mortgagee  is  contained 
in  the  mortgage  deed  does  not  necessarily  make  that  stipulation 
invalid. 


Santley  v.  Wilde,  [1899]  2  Ch.  474.— The  plaintiff,  Miss  Kate 
Santley,  being  the  sub-lessee  of  the  Royalty  Theatre,  and  having  an 
option  to  acquire  the  reversion  of  the  head-lease  on  paying  £2000 
within  a  limited  time,  borrwed  that  sum  of  the  defendant,  S.  J. 
Wilde,  on  the  terms  of  the  loan  being  repaid  with  six  per  cent,  inter- 
est and  secured  by  a  legal  mortgage,  which  was  also  to  provide  for 
payment  to  said  Wilde  of  one-third  of  the  clear  net  profit  rental  of 
the  theatre.  The  mortgage,  executed  in  pursuance  of  the  agree- 
ment, was  for  the  whole  of  the  term  acquired  by  the  plaintiff,  less 


418  EQUITY   RELATIONS 

one  day,  and  contained  a  covenant  by  her  for  repayment  of  the 
£2000  by  twenty  quarterly  instahnents  of  £100  each,  and  also  a 
covenant  to  pay  the  one-third  of  the  profit  rental  during  the  whole 
of  the  mortgagor's  term,  although  the  £2000  and  interest  should 
all  have  been  paid.  The  property  was  redeemable  only  on  the 
payment  of  £2000  and  interest,  and  all  other  moneys  covenanted 
to  be  paid.  Some  of  the  instalments  being  in  arrears,  defendant 
gave  plaintiff  three  months'  notice  to  pay  off  all  the  principal  mon- 
eys and  interest  secured  by  the  mortgage.  Plaintiff  paid  the  in- 
stalments in  arrear,  and  within  the  three  months  tendered  the  bal- 
ance of  the  £2000,  with  interest  to  the  end  of  the  three  months 
and  the  costs,  but  Wilde  refused  to  accept  the  money. 

Plaintiff  then  brought  the  present  action,  claiming  (1)  a  declara- 
tion that  the  mortgage  ought  to  stand  as  a  security  for  the  £2000, 
or  so  much  thereof  as  remained  owing,  with  interest,  and  that  so  far 
as  the  same  deed  provided  for  payment  to  the  defendant  of  a  share 
of  the  rents  and  profits,  or  precluded  the  plaintiff  from  redeeming 
on  payment  of  principal  and  interest,  such  deed  was  invalid  and 
not  binding  on  the  plaintiff;  (2)  redemption  and  reconveyance. 

The  defendant  counter-claimed  for  (1)  a  declaration  that  during 
the  residue  of  the  leasehold  term,  notwithstanding  that  all  the  prin- 
cipal and  interest  had  been  paid,  he  was  entitled  to  be  paid  one- 
third  of  the  clear  net  profit  rental;  (2)  an  account  of  what  was  due 
on  the  footing  of  that  declaration.^ 

LiNDLEY,  M.  R.  The  question  raised  on  this  appeal  is  extremely 
important :  I  do  not  profess  to  be  able  to  decide  it  on  any  principle 
which  will  be  in  harmony  with  all  the  cases;  but  it  appears  to  me 
that  the  true  principle  running  through  them  is  not  very  difficult 
to  discover,  and  I  think  that  it  can  be  applied  so  as  to  do  justice  in 
this  case  and  in  all  other  cases  on  the  subject  that  may  arise.  The 
principle  is  this:  a  mortgage  is  a  conveyance  of  land  oran  assign- 
T^eTit  of  chattelsaTl  security  for  the  payment  of^^ebt  or  the 
di7£tmil^r^  ""^'^^  "^"^^^ZSlligation  for  which  it  iTiiven.  This  is 
the  idea  of  a  mortgage;  and  the  security  is  redeemable  on  the  pay- 
ment or  discharge  of  such  debt  or^obligation,  any  provision  to  the 
contrary  notwithstaTTHihg.  "That,  in  my  opinion  is  the  law.  Any 
provision  inserted  to  prevent  redemption  on  payment  or  perform-^ 
ance  of  the  debt  or  obligation  for  which  the  security  was  given  is 
what  is  meant  by  a  clog  or  fetter  on  the  equity  of  redemption,  and 

iThis   statement   of   facts   is   ab-       in    the    court    below:    [1899]    1    Ch. 
breviated  from  the  report  of  the  case       747. 


SANTLEY    V.    WILDE  419 

i^  therefore  void.     It  follows  from  this,  that  "once  a  mortgage  I 


always  a  mortgage;"  but  I  do  not  understand  that  this  principle 
involves  the  fui'ther  proposition  that  the  amount  or  nature  of  the 
further  debt  or  obligation  the  payment  or  performance  of  which 
is  to  be  secured  is  a  clog  or  fetter  within  the  rule:  see  1  Powell  on 
Mortgages,  6th  ed.,  pp.  116  et  seq.:  title,  "How  a  Mortgage  is  con- 
sidered in  Equity."  The  right  to  redeem  is  not  a  personal  right, 
but  an  equitable  estate  or  interest  in  the  property  mortgaged.  A 
"clog  "  or  "fetter  "  is  something  which  is  inconsistent  with  the  idea 
of  "security":  a  clog  or  fetter  is  in  the  nature  of  a  repugnant  con- 
dition. If  I  convey  land  in  fee  subject  to  a  condition  forbidding 
alienation,  that  is  a  repugnant  condition.  If  I  give  a  mortgage  on 
a -condition  that  I  shall  not  redeem,  that  is  a  repugnant  condition. 
The  Courts  of  Equity  have  fought  for  years  to  maintain  the  doc- 
trine that  a  security  is  redeemable.  But  when  and  under  what 
circumstances?  On  the  performance  of  the  obligation  for  which  it 
was  given.  If  the  obligation  is  the  payment  of  a  debt,  the  security 
is  redeemable  on  the  payment  of  that  debt.  That,  in  my  opinion, 
is  the  true  principle  applicable  to  the  cases,  and  that  is  what  is 
meant  when  it  is  said  there  must  not  be  any  clog  or  fetter  on  the 
equity  of  redemption.  If  so,  this  mortgage  has  no  clog  or  fetter 
at  all.  Of  course,  the  debt  or  obligation  may  be  impeachable  for 
fraud,  oppression,  or  over-reaching:  there  the  obligation  is  tainted 
to  that  extent  and  is  invalid.  But,  putting  such  cases  out  of  the 
question,  when  you  get  a  security  for  a  debt  or  obligation,  that 
security  can  be  redeemed  the  moment  the  debt  or  obligation  is 
paid  or  performed,  but  on  no  other  terms. ^ 

1  "I  take  it  that  it  is  clearly  estab-  the  mortgagee  as  a  condition  of  the 

lished  now,  in  the  first  place,   that  loan,  that  advantage  or  contract  is 

there  is  no  such  principle  as  is  sug-  to  be  presumed  to  have  been  given 

gested,    namely,    that    a   mortgagee  or  made  under  pressure.     There  is 

shall  not  stipulate  for  any  collateral  no  such  presumption,  but  each  case 

advantage  for  himself.     He  may  so  must    be    decided    according    to    its 

stipulate;  and,  if  he  does,  he  may  own  circumstances.     The  Court  will 

obtain  a  collateral  advantage:  noth-  look  into  the  circumstances  of  each 

ing  can  be  said  against  it,  and  he  case   and   see   whether   the   bargain 

can  enforce  it,  always  assuming  that  come   to    is   unconscionable    or   op- 

the  bargain  is  not  unconscionable  or  pressive." — Per    Romer,    L.    J.,    in 

oppressive.     In  the  second  place,  I  s.  c.  id.  p.  478. 

take  it  also  to  be  clear  that  there  is  But  cf.  Noakes  &  Co.,  Ltd.,  v.  Rice, 

now    no    such    principle    as    is    sug-,  [1902]  A.  C.  24;  Bradley  v.  Carritt, 

gested,  namely,  that  where  a  collat-  [1903]  A.  C.  253. 
eral  advantage  is  stipulated  for  by 


420  EQUITY   RELATIONS 

SAMUEL  V.  JARRAH  TIMBER  AND  WOOD  PAVING 
CORPORATION,   LIMITED 

House  of  Lords,  1904 

(L.  R.  [1904]  A.  C.  323) 

By  letter  dated  June  11,  1901,  the  appellant  Henry  Samuel 
offered  to  advance  to  the  respondent  company  5000?.  at  6  per  cent, 
upon  the  security  of  30,000?.  first  mortgage  debenture  stock  of  the 
company,  subject  to  his  having  "the  option  to  purchase  the  whole 
or  any  part  of  such  stock  at  40  per  cent,  at  any  time  within  twelve 
months."  Other  conditions  were  attached  to  the  offer,  but  they 
are  not  material  for  the  purpose  of  the  present  question.  Then 
followed  this  provision:  "The  advance  to  become  due  and  payable 
with  interest  at  thirty  days'  notice  on  either  side." 

The  offer  was  accepted  by  the  company.  The  stock  was  duly 
created  and  registered  in  Mr.  Samuel's  name. 

Within  the  period  of  twelve  months,  and  before  the  company 
gave  notice  of  intention  to  repay  the  advance,  Mr.  Samuel  claimed 
to  purchase  the  whole  of  the  mortgaged  stock  at  the  agreed  price. 
Thereupon  the  company  brought  this  action,  asking  for  redemption 
and  a  declaration  that  the  option  was  illegal  and  void. 

I  Kekewich,  J.,  gave  judgment  for  the  company,  declaring  that 
the  stipulation  giving  the  appellant  an  option  to  purchase  was 
void,  and  that  the  company  was  entitled  to  redeem  and  have  the 
stock  transferred  on  payment  of  whatever  was  due  for  principal, 
interest,  and  costs,  with  consequential  relief.  [1902]  2  Ch.  479. 
This  decision  was  affirmed  by  the  Court  of  Appeal  (Collins,  M.  R., 
RoMER  and  Cozens-Hardy,  L.  JJ.).    [1903]  2  Ch.  1. 

Earl  of  Halsbury,  L.  C.  (read  by  Lord  Macnaghten).  My 
Lords,  I  regret  that  the  state  of  the  authorities  leaves  me  no  alter- 
native other  than  to  affirm  the  judgment  of  Kekewich,  J.,  and  the 
Court  of  Appeal.  A  perfectly  fair  bargain  made  between  two  par- 
ties to  it,  each  of  whom  was  quite  sensible  of  what  they  were  doing, 
is  not  to  be  performed  because  at  the  same  time  a  mortgage  ar- 
rangement was  made  between  them.  If  a  day  had  intervened  be- 
tween the  two  parts  of  the  arrangement,  the  part  of  the  bargain 
which  the  appellant  claims  to  be  performed  would  have  been  per- 
fectly good  and  capable  of  being  enforced;  but  a  line  of  authori- 


SAMUEL   V.   JARRAH   TIMBER   AND    WOOD    PAVING    CORP.,    LTD.      421 

ties  going  back  for  more  than  a  century  has  decided  that  such  an 
arrangement  as  that  which  was  here  arrived  at  is  contrary  to  a 
principle  of  equity,  the  sense  of  reason  of  which  I  am  not  able  to 
appreciate,  and  very  reluctantly  I  am  compelled  to  acquiesce  in 
the  judgments  appealed  from. 

Lord  Macnaghten.  My  Lords,  both  Kekewich,  J.,  and  the 
Court  of  Appeal  decided  in  favour  of  the  company.  Having  re- 
gard to  the  state  of  the  authorities  binding  on  the  Court  of  Ap- 
peal if  not  on  this  House,  it  seems  to  me  that  they  could  not  have 
come  to  any  other  conclusion,  although  the  transaction  was  a 
fair  bargain  between  men  of  business  without  any  trace  or  suspicion 
of  oppression,  surprise,  or  circumvention. 

It  is,  I  think,  unnecessary  to  consider  what  the  true  construction 
of  the  agreement  between  Mr.  Samuel  and  the  company  may  be. 
The  result  would  have  been  precisely  the  same  if  the  agreement  had 
in  terms  declared  that  the  option  was  not  to  continue  after  repay- 
ment. The  law  undoubtedly  is  that  a  condition  such  as  that  in 
question,  if  legal  and  binding  at  all,  must  come  to  an  end  on  re- 
-joavmeni  oi  ihe  ioan.  _ 

In  the  Court  of  Appeal  the  question  was  treated  as  governed  by 
the  principle,  of  which  Noakes  v.  Rice,  [1902]  A.  C.  24,  is  a  recent! 
example,  that  on  redemption  the  mortgagor  is  entitled  to  have  the 
thing  mortgaged  restored  to  him  unaffected  by  any  condition  or 
stipulation  which  formed  part  of  the  mortgage  transaction. 

That  principle,  I  think,  is  perfectly  sound.  But,  in  my  opinion, 
the  question  here  depends  rather  uppn  the  rule  that  a  mortgagee 
is  not  allowed  at  the  time  of  the  loan  to  enter  into  a  contract  for 
the  purchase  of  the  mortgaged  property. 

This  latter  rule,  I  think,  is  founded  on  sentiment  rather  than  on 
principle.  It  seems  to  have  had  its  origin  in  the  desnre  of  the  Court 
of  Chancery  to  protect  embarrassed  landowners  from  imposition 
and  oppression.  And  it  was  invented,  I  should  suppose,  in  order 
to  obviate  the  necessity  of  inquiry  and  investigation  in  cases  where 
suspicion  may  be  probable  and  proof  difficult.  I  gather  from  some 
general  observations  made  by  Lord  Hardwicke  in  Mellor  v. 
Lees  (1742),  2  Atk.  494,  that  he  would  have  been  disposed  to  con- 
fine the  rule  to  cases  in  which  the  Court  finds  or  suspects  "a 
design  to  wrest  the  estate  fraudulently  out  of  the  hands  of  the  mort- 
gagor," and  to  cases  of  "common  mortgage" — that  is,  as  I  under- 
stand it,  mortgage  of  land  by  deed.  It  will  be  oliservod  that  in  the 
later  case  of  Toomes  v.  Conset  (1745),  3  Atk.  2(il,  which  is  often 


422  EQUITY   RELATIONS 

referred  to  for  a  statement  of  the  rule,  his  Lordship  speaks  only 
of  "a  deed  of  mortgage";  an  instrument  which  perhaps  rather 
lends  itself  to  imposition — for  no  one,  I  am  sure,  by  the 
light  of  nature  ever  understood  an  English  mortgage  of  real 
estate. 

In  Vernon  v.  Bethell  (1761),  2  Eden,  113,  however,  Northington 
L.  C.  (then  Lord  Henley),  laid  down  the  law  broadly  in  the  fol- 
lowing terms:  "This  Court,  as  a  Court  of  conscience,  is  very  jealous 
of  persons  taking  securities  for  a  loan  and  converting  such  securi- 
ties into  purchases.  And  therefore  I  taJce  it  to  be  an  established 
nilp  tf^a.t  a.  raortgfl£:ee  can  never  provide  at  the  time  of  making 
the  loan  for  any  event  or  condition  on  which  the_eqmtv  orredfimpg 
iioiTshall  be  diseharp:ed  and  the  conveyance  absolute.  And  there 
is  great  reason  and  justice  Tn  this  rule,  for  necessitous  men  are 
not,  truly  speaking,  free  m6n,  but  to  answer  a  present  exigency 
will  submit  to  any  terms  that  the  crafty  may  impose  upon 
them.". 

This  doctrine,  described  by  Lord  Henley  as  an  estabhshed  rule 
nearly  150  years  ago,  has  never,  so  far  as  I  can  discover,  been  de- 
parted from  since  or  questioned  in  any  reported  case.  It  is,  I 
believe,  universally  accepted  by  text-writers  of  authority.  Speak- 
ing for  myself,  I  should  not  be  sorry  if  your  Lordships  could  see  your 
way  to  modify  it  so  as  to  prevent  its  being  used  as  a  means  of 
evading  a  fair  bargain  come  to  between  persons  dealing  at  arms' 
length  and  negotiating  on  equal  terms.  The  directors  of  a  trading 
company  in  search  of  financial  assistance  are  certainly  in  a  very 
different  position  from  that  of  an  impecunious  landowner  in  the 
toils  of  a  crafty  modey-lender.  At  the  same  time  I  quite  feel  the 
difficulty  of  interfering  with  any  rule  that  has  prevailed  so  long, 
and  I  am  not  prepared  to  differ  from  the  conclusion  at  which  the 
Court  of  Appeal  has  arrived. 

I  am  therefore  of  opinion  that  the  appeal  must  be  dismissed  with 
costs,  and  I  move  your  Lordships  accordingly. 

Lord  Lindley.  My  Lords,  the  letter  of  June  11,  1901,  written 
by  the  defendant  to  the  plaintiff  company,  contained  an  offer  of  a 
loan  of  5000L  to  the  company  upon  certain  terms,  and  tliis  offer 
and  the  terms  proposed  were  accepted  by  the  company  by  their 
letter  in  answer,  dated  June  14,  1901.  These  two  letters  consti- 
tuted an  agreement  between  the  parties.  The  main  provisions  are 
as  follows,  namely:  1.  That  the  defendant  should  forthwith  lend 
the  company  5000L  at  6  per  cent.,  redeemable  on  thirty  days'  no- 


SAMUEL    V.    JARRAH    TIMBER   AND    WOOD    PAVING    CORP.,    LTD.      423 

tice  In'  either  part}'.  2.  That  the  defendant  should  have  as  security 
30,000/.  of  the  company's  first  mortgage  debenture  stock  trans- 
ferred to  him.  3.  That  the  directors  of  the  company  should  elect 
a  nominee  of  his  on  their  board.  4.  That  the  defendant  should 
have  the  option  of  purchasing  the  whole  or  any  part  of  such  stock 
at  40  per  cent,  at  any  time  within  twelve  months.  5.  That  he 
should  have  a  further  option,  namely,  in  the  event  of  the  com- 
pany at  any  time  raising  further  capital  or  selling  its  under- 
taking for  shares  or  stocks  of  another  company,  the  defendant 
should  have  the  option  of  underwriting  the  taking  up  of  such 
new  capital,  or  shares,  or  stocks  at  a  commission  of  10  per 
cent. 

The  first  question  is,  What  is  the  true  nature  of  this  agreement? 
Is  it  a  mortgage  with  an  option  to  purchase,  or  is  it  a  conditional 
sale?  Or  is  it  an  agreement  giving  Samuel  an  option  to  hold  the 
debenture  stock  as  a  mortgage  or  a  purchase?  It  appears  to  me  to 
be  clearly  a  mortgage  with  an  option  to  purchase.  A  loan  of  5000/. 
on  security  was  what  the  company  wanted,  and  what  Samuel 
agreed  to  let  the  company  have  on  terms.  They  were  not  bargain- 
ing for  anjd;hing  else.  As  soon  as  the  5000/.  was  advanced  and  the 
debenture  stock  was  placed  at  Samuel's  disposal  he  was  in  the  posi- 
tion of  mortgagee  of  that  stock.  He  had  the  rights  of  a  mortgagee, 
and  the  company  had  the  rights  of  a  mortgagor.  There  was  that 
reciprocity  and  mutuality  of  remedies  which  distinguish  a  mort- 
gage transaction  from  a  conditional  sale  and  from  other  transac- 
tions more  or  less  resembling  a  mortgage,  but  not  really  constitut- 
ing a  mortgage.  The  transaction  was  in  my  opinion  a  mortgage, 
plus,  amongst  other  things,  an  option  to  purchase,  which  if  exer- 
cised by  the  mortgagee  would  put  an  end  to  the  mortgagor's  right 
to  redeem — i.  e.,  would  prevent  him  from  getting  back  his  mort- 
gaged property.  This  was  the  view  taken  by  Kekewich,  J.,  and 
by  all  the  members  of  the  Court  of  Appeal,  and  I  am  unable  myself 
to  view  the  transaction  differently. 

In  Lisle  v.  Reeve,  [1902]  1  Ch.  53,  at  p.  68,  Buckley,  J.,  suggested 
•  some  instances  in  which  he  considered  a  mortgagee  might  validly 
stipulate  for  an  option  to  buy  the  equity  of  redemption;  but  al- 
though his  decision  was  affirmed  first  by  the  Court  of  Appeal 
and  afterwards  by  this  House  (Reeve  v.  Lisle,  [1902]  A.  C.  461), 
the  affirmance  proceeded  entirely  on  the  fact  that  the  agreement 
to  buy  the  equity  of  redemption  was  no  part  of  the  original  mort- 
gage transaction,  but  was  entered  into  subsequently,  and  was  an 
entirely  separate  transaction  to  which  no  objection  could  be  taken. 


424  '  EQUITY    RELATIONS 

It  is  plain  that  the  decision  would  not  have  been  affirmed  if  the 
agreement  to  buy  the  equity  of  redemption  had  been  one  of 
the  tei-ms  of  the  original  mortgage.  2  W.  &  T.,  7th  ed.,  p.  16. 
The  Irish  case  Re  Edward's  Estate,  (1861),  11  Ir.  Ch.  Rep.  367,  is 
to  the  same  effect. 

I  cannot  help  thinking  that  both  parties  intended  that  the  two 
options  to  purchase  the  30,000Z.  debenture  stock  and  to  underwrite 
further  capital  or  debenture  stock  if  issued  were  to  be  exercisable 
even  after  paj'ment  off  of  the  5000/.  But  the  decisions  of  this 
House  in  Noakes  v.  Rice,  [1902]  A.  C.  24,  and  Bradley  v.  Carritt, 
[1903]  A.  C.  253,  conclusively  shew  that,  whatever  might  have 
been  intended,  Samuel  could  not  have  been  entitled  to  exercise 
either  option  after  repayment  of  his  loan.  But  these  decisions  and 
the  previous  decision  of  Salt  v.  Northampton,  [1892]  A.  C.  1,  em- 
phatically recognize  the  old  doctrine,  "Once  a  mortgage  always  a 
mortgage,"  which  is  too  well  settled  to  be  open  to  controversy. 
Lord  Hardwicke  said  in  Toomes  v.  Conset,  3  Atk.  261:  "This  Court 
will  not  suffer  in  a  deed  of  mortgage  any  agreement  in  it  to  prevail 
that  the  estate  become  an  absolute  purchase  in  the  mortgagee  upon 
any  event  whatsoever."  But  the  doctrine  is  not  confined  to  deeds 
creating  legal  mortgages.  It  applies  to  all  mortgage  transactions. 
The  doctrine  "Once  a  mortgage  always  a  mortgage "  means  that  no 
contract  between  a  mortgagor  and  a  mortgagee  made  at  the  time 
of  the  mortgage  and  as  part  of  the  mortgage  transaction,  or,  in 
other  words,  as  one  of  the  terms  of  the  loan,  can  be  valid  if  it  pre- 
vents the  mortgagor  from  getting  back  his  property  on  paying 
off  what  is  due  on  his  security.  Any  bargain  which  has  that  effect 
is  invalid,  and  is  inconsistent  with  the  transaction  being  a  mortgage. 
This  principle  is  fatal  to  the  appellant's  contention  if  the  transac- 
tion under  consideration  is  a  mortgage  transaction,  as  I  am  of  opin- 
ion it  clearly  is. 

Then  it  was  contended  that,  as  the  property  mortgaged  was 
debenture  stock  issued  by  a  limited  company,  the  case  did  not  fall 
within  the  principle  to  which  I  have  been  referring.  I  confess  my 
inability  to  follow  the  argument  on  this  point.  Debenture  stock 
is  usually  a  sum  of  money  charged  on  the  assets  of  the  company 
issuing  it.  It  may  be  redeemable  or  irredeemable,  in  which  case 
it  is  not  a  mortgage  at  all.  But  whether  redeemable  or  irredeem- 
able, it  is  capable  of  being  made  a  security  for  money  lent  upon  it. 
It  can  be  mortgaged  as  well  by  the  company  which  issues  it  as  by 
an  ordinary  holder.  I  can  discover  no  reason  for  treating  a  mort- 
gage of  debenture  stock  as  something  so  different  from  other  mort- 


FAIRCLOUGH    V.    SWAN    BREWERY    CO.,    LTD.  425 

gages  as  to  render  the  principle  "Once  a  mortgage  always  a  mort- 
gage "  inapplicable  to  it. 

In  my  opinion  the  appeal  ought  to  be  dismissed  with  costs. 

Order  of  the  Court  of  Appeal  affirmed  and  appeal  dismissed  with 
costs. ^ 


FAIRCLOUGH  v.  SWAN  BREWERY  CO.,  LTD. 

Privy  Council,  on  Appeal  from  the  Supreme  Court  of 
Western  Australia,  1912 

(L.  R.  [1912]  A.  C.  565) 

Appeal  from  an  order  of  the  Full  Court  varying  a  judgment  of 
McMillan,  J. 

The  question  submitted  was  whether  a  clause  set  out  in  their 
Lordships'  judgment  in  a  mortgage  deed  by  the  lessee  of  an  hotel 
to  a  brewery  company  precluding  the  lessee  from  redeeming  his 
mortgage  for  the  whole  of  the  residue  of  the  term  for  which  the 
mortgagor  held  the  hotel  less  a  few  weeks,  being  a  period  of  more 
than  seventeen  years,  and  precluding  him  from  purchasing  beer, 
during  the  continuance  of  the  security,  from  any  person  other  than 
the  mortgagees,  were  void  as  being  a  clog  on  the  equity  of  re- 
demption and  in  restraint  of  trade. 

The  appellant  bought  the  hotel  in  December,  1907,  from  a  vendor 
who  held  the  same  under  a  lease  for  twenty  years  from  June  12, 
1905,  at  a  yearly  rent  of  520/.  subject  to  a  mortgage  to  the  respon- 
dents on  which  1500/.  was  due.  The  respondents  refused  to  be  paid 
off,  insisting  that  500/.  should  remain  fo  cover  the  tied  covenant 
upon  the  hotel  which  the  vendor  had  given.  The  appellant  on 
December  27,  1907,  executed  a  mortgage  for  500/.  which  con- 
tained the  said  clause;  and  accordingly  the  respondents  refused  to 
allow  him  to  redeem  except  by  the  monthly  instalments  fixed  by  the 
mortgage  deed. 

On  June  23,  1910,  the  respondents  sued  to  recover  damages  for 
the  appellant's  breach  of  his  covenant  in  the  said  mortgage  deed 
to  purchase  from  them  ale,  beer,  and  stout,  an  account  of  the  ale, 
beer,  and  stout  purchased  t)y  the  appellant  in  breach  of  the  said 
covenant,  and  an  injunction  to  restrain  him  from  committing  any 
further  breach  thereof. 

1  Cf.  De  Beers  Consolidated  Mines,  [1912],  A.  C.  52,  reversing  [1910]  2 
Ltd.,   V.    British    South    Africa    Co.      Ch.  502. 


426  EQUITY   RELATIONS 

The  appellant  pleaded  that  the  covenant  was  an  unreasonable 
and  unnecessary  restraint  of  trade,  was  contrary  to  public  poUcy 
and  illegal,  and  was  only  binding  during  the  continuance  of  the 
security  created  by  the  mortgage  deed,  and  that  the  appellant 
ought  to  be  allowed  to  redeem  the  said  mortgage  as  he  had  already 
offered  to  do,  and  that  the  said  covenant  was  a  clog  on  the  appel- 
lant's equity  of  redemption  of  the  mortgaged  premises  and  was  null 
and  unenforceable;  and  the  appellant  counterclaimed  against 
the  respondents  for  damages  for  the  breach  of  covenant  by  the 
respondents  to  supply  him  with  the  ale,  beer,  and  stout  required 
by  him,  and  for  declaration  that  the  covenant  sued  on  by  the 
respondents  was  invalid,  and  that  the  stipulations  for  continuance 
of  the  security  were  void,  and  for  redemption  of  the  mortgaged 
premises  on  payment  of  principal,  interest,  and  costs. 

McMillan,  J.,  found  that  the  provisions  in  the  mortgage  deed 
which  prevented  the  appellant  from  redeeming  for  seventeen  and  a 
half  years  were  for  the  benefit  of  the  respondents,  and  he  held  that 
they  were  void  as  being  an  unreasonable  clog  on  the  appellant's 
equity  of  redemption.  He  held  that  the  appellant  was  entitled  to 
redeem,  and  refused  the  injunction  sought,  holding  that  there  was 
no  breach  after  redemption  had  been  refused. 

The  Full  Court  in  appeal  agreed  with  McMillan,  J.,  in  his  find- 
ing that  the  postponement  of  the  period  of  redemption  was  for  the 
benefit  of  the  respondents  in  order  to  make  sure  that  the  hotel 
would  remain  a  tied  house,  but  held  that  the  provisions  in  the 
mortgage  deed  preventing  the  appellant  from  redeeming  the  mort- 
gage were  not  unreasonably.  They  accordingly  rescinded  the  order 
declaring  the  appellant  entitled  to  redeem  and  ordered  that  the 
appellant  should  be  restrained  during  the  continuance  of  the  mort- 
gage from  any  further  breach  of  his  covenant  and  that  the  respond- 
ents should  recover  damages  for  breaches  already  committed. 

I  Lord  Macnaghten.  James  Fairclough,  a  pubHcan,  the  appel- 
lant in  this  case,  became  the  registered  proprietor  of  a  lease  of  the 
Federal  Hotel,  Katanning,  for  the  residue  of  a  term  of  twenty 
years  from  June  12,  1905. 
By  an  instrument  of  mortgage  dated  December  27,  1907,  the 
appellant,  therein  called  "the  mortgagor,"  in  consideration  of  the 
sum  of  500Z.  lent  to  him  by  the  respondent  company,  and  in  con- 
sideration of  all  moneys  which  might  thereafter  become  owing  by 
the  mortgagor  to  the  company  for  goods  supplied,  or  for  money 


FAIRCLOUGH   V.    SWAN   BREWERY   CO.,    LTD.  427 

lent  or  advanced,  or  on  any  other  account  whatever,  did  thereby 
for  himself,  his  heirs,  executors,  administrators,  and  transferees, 
covenant  with  the  company  as  follows:  "That  the  mortgagor  will 
pay  to  the  company  the  said  principal  sum  of  500^  by  209  succes- 
sive monthly  instalments  as  follows,  that  is  to  say,  208  instalments 
of  21.  8s.  each,  and  one  final  instalment  of  16s.,  the  first  of  such 
monthly  instalments  of  21.  8s.  to  be  paid  on  the  1st  day  of  every 
succeeding  month  thereafter  until  the  whole  of  the  said  principal  1 
sum  of  500L  shall  be  paid  off,  provided  always  that  the  mortgagor 
shall  not  be  at  liberty  to  pay  off  the  said  principal  sum  except  by 
the  instalments,  and  at  the  times  aforesaid,  without  the  express 
consent  in  writing  of  the  company  on  each  occasion  first  had  and 
obtaine'd." 

Then  followed  a  covenant  for  payment  of  interest  on  the  amount 
from  time  to  time  remaining  unpaid,  at  the  rate  of  7  per  cent,  per 
annum  on  the  first  day  of  every  calendar  month,  and  other  cove- 
nants including  a  covenant  stipulating  in  effect  that  during  the 
continuance  of  the  security  the  Federal  Hotel  should  be  a  tied  house 
in  favour  of  the  company.  For  better  securing  the  payment  in 
manner  aforesaid  of  the  said  principal  sum  and  interest,  and  all 
other  moneys  intended  to  be  thereby  secured,  the  mortgagor 
thereby  mortgaged  all  his  estate  and  interest  in  the  Federal  Hotel 
to  the  company. 

It  will  be  observed  that  the  lease  is  made  to  expire  on  June  12, 
1925,  and  that  the  instrument  of  mortgage  provides  that  without 
the  consent  in  writing  of  the  company  the  mortgage  debt  of  500/.  is 
not  to  be  wholly  paid  off  until  May  1,  1925,  that  is  just  six  weeks 
before  the  actual  expiration  of  the  lease. 

In  December,  1909,  the  company  were  prevented  by  accidental 
circumstances  from  supplying  the  appellant  with  beer  in  accordance 
with  a  covenant  on  their  part  contained  in  the  mortgage  deed.  The 
appellant  thereupon  assumed  to  treat  the  tie  as  at  an  end,  and 
obtained  beer  from  other  quarters.  The  company  brought  an 
action  for  damages  and  for  an  injunction.  The  appellant,  who 
apparently  had  already  offered  to  redeem,  counterclaimed  for  re- 
demption. McMillan,  J.,  gave  judgment  for  the  company  in  the 
action,  and  assessed  the  damages  at  81.  On  the  counterclaim 
he  gave  judgment  for  the  appellant,  holding  that  by  law  he  was 
entitled  to  redeem.  On  appeal  to  the  Full  Court  an  order  was  made 
in  the  action  in  favour  of  the  company  with  a  reference  as  to  dam- 
ages. The  counterclaim  was  dismissed  with  costs.  Hence  the 
present  appeal. 


428  EQUITY   RELATIONS 

The  arguments  of  counsel  ranged  over  a  very  wide  field.  But 
the  real  point  is  a  narrow  one.  It  depends  upon  a  doctrine  of  eq- 
uity, which  is  not  open  to  question. 

"There  is,"  as  Kindersley,  V.  C,  said  in  Gosdv  v.  Wright 
(1863),  32  (Ch.)  648,  653,  "no  doubt  that  the  broad  rule  is  this: 

.  that  the  Court  will  not  allow  the  rip;ht  of  redemption  in  any  way 

'  to  be  hampered  or  crippled  in  that  which  the  parties  intended  ta 
be  a' security  either  by  any  conteniporaneous  instrument  with  t he_ 

'^ed  ill  (luiJyLioii,  or  By^nything  which  this  Court  would  regard - 
as  a  simnltflnemis  arrangement  or  i)aii  of  xne  sanae  transaction." 
The  rule  in  comparatively  recent  times  was  unseTtled  by  certain 
decisions  in  the  Court  of  Chancery  in  England  which  seem  to  have 
misled  the  learned  judges  in  the  Full  Court.  But  it  is  now  firmly 
estabhshed  by  the  House  of  Lords  that  the  old  rule  still  prevails 
and  that  equity  will  not  permit  any  device  or  contrivance  being 
part,  of  the  mortgage  transaction  or  contemporaneous  with  it  to 
prevent  or  impede  redemption.  The  learned  counsel  on  behalf 
of  the  respondents  admitted,  as  he  was  bound  to  admit,  that  a 
mortgage  cannot  be  madeirredeemable.    That  is  plainly  forbidden. 

"  Is  there  any  difference  between  forbidding  redemption  and  per- 
mitting it,  if  the  permission  be  a  mere  pretence?  Here  the  provi- 
sion for  redemption  is  nugatory.  The  incumbrance  on  the  lease 
the  subject  of  the  mortgage  according  to  the  letter  of  the  bargain 
falls  to  be  discharged  before  the  lease  terminates,  but  at  a  time 
when  it  is  on  the  very  point  of  expiring,  when  redemption  can  be 
of  no  advantage  to  the  mortgagor  even  if  he  should  be  so  fortunate 
as  to  get  his  deeds  back  before  the  actual  termination  of  the  lease. 
For  all  practical  purposes  this  mortgage  is  irredeemable.  It  was 
obviously  meant  to  be  irredeemable.  It  was  made  u-redeemable 
in  and  by  the  mortgage  itself. 

Their  Lordships  are  therefore  of  opinion  that  the  order  of  the 
Full  Court  should  be  discharged  with  costs,  and  the  decision  of 
McMillan,  J.,  restored.  Their  Lordships  will  humbly  advise  His 
Majesty  accordingly. 

The  respondent  company  will  pay  the  costs  of  this  appeaL 


KBEGLINGER    V.    NEW    PATAGONIA    STORAGE    CO.,    LTD.         429 

KREGLINGER  v.  NEW  PATAGONIA  MEAT  AND  COLD 
STORAGE  COMPANY,  LTD. 

House  of  Lords,  1913 

(L.  R.  [1914]  A.  C.  25) 

Appeal  from  an  order  of  the  Court  of  Appeal  affirming  an  order 
of  Swinfen  Eady,  J.^ 

Viscount  Haldane,  L.  C.  My  Lords,  the  appellants  are  a  firm 
of  merchants  and  woolbrokers.  The  respondents  carry  on  the 
business  of  preserving  and  canning  meat  and  of  boiling  down  the 
carcases  of  sheep  and  other  animals.  In  the  course  of  this  business 
they  have  at  their  disposal  a  large  number  of  sheepskins.  It  ap- 
pears that  in  the  summer  of  1910  the  respondents  were  desirous 
of  borrowing  10,000L,  and  requested  the  appellants  to  advance 
that  sum.  The  appellants,  who  were  desirous  of  obtaining  an 
option  to  purchase  for  a  term  of  five  years  all  the  sheepskins  at  the 
respondents'  disposal,  agreed  to  lend  the  money  in  consideration  of 
being  given  such  an  option.  The  negotiations  which  followed  re- 
sulted in  an  agreement  dated  August  24,  1910.  Under  this  agree- 
ment the  appellants  were  to  lend  the  respondents  the  sum  of 
10,000/.  repayable  on  demand  with  interest  at  6  per  cent.  If, 
however,  among  other  conditions  to  be  observed,  the  interest  was 
duly  paid,  the  appellants  were  not  to  demand  repayment  till 
September  30,  1915,  but  the  respondents  were  to  be  at  liberty  to 
pay  off  the  loan  earlier.  To  secure  the  loan  the  respondents  by  the 
agreement  charged  their  undertaking  and  all  their  property,  both 
present  and  future,  with  the  payment  of  the  principal  sum  and 
interest  to  the  intent  that  the  charge  should  be  a  floating  security 
on  the  undertaking  and  property,  but  so  that  the  respondents 
should  not  create  any  mortgage  or  charge  in  priority  without  the 
appellants'  consent,  or  without  such  consent  sell  their  farms  or  lands. 
The  principal  sum  was  to  be  made  payable  in  certain  prescribed 
events.  By  clause  8  of  the  agreement  the  respondents  were  not 
for  five  years  from  the  date  of  the  agreement  (i.  e.,  till  August  24, 
1915)  to  sell  sheepskins  to  any  one  excepting  the  appellants,  so 
long  as  the  latter  were  willing  to.  buy  at  a  price  equal  to  the  best 

1  Statement  abridged.  Concurring  omitted.  Portions  of  the  opinions  of 
opinions  of  the  Earl  of  Halsbury  Viscount  Haldane,  L.  C,  and  of 
and  of  Lords  Atkinson  and  Mersey      Lord  Parker  are  omitted. 


430  EQUITY   RELATIONS 

price  (c.  i.  f.  London)  offered  by  any  one  else,  and  the  respondents 
were  to  pay  to  the  appellants  a  commission  of  1  per  cent,  on  the  sale 
price  of  all  sheepskins  sold  by  the  respondents  to  any  one  else. 

My  Lords,  the  respondents  have  now,  as  they  were  entitled  to  do 
under  the  agreement,  paid  off  the  loan.  They  claim  that  such 
payment  has  put  an  end  to  the  option  of  the  appellants  to  buy  the 
respondents'  sheepskins.  Under  the  terms  of  the  agreement  this 
option,  as  I  have  already  stated,  will,  if  it  is  vahd,  continue  op- 
ei-ative  until  August  24,  1915.  What  the  respondents  say  is  that 
the  stipulation  is  one  that  restricts  their  freedom  in  conducting 
the  undertaking  or  business  which  is  the  subject  of  the  floating 
charge;  that  it  was  consequently  of  the  nature  of  a  clog  on  their 
right  to  redeem  and  invalid;  and  that,  whether  it  clogged  the  right 
to  redeem  or  was  in  the  nature  of  a  collateral  advantage,  it  was  not 
intended  and  could  not  be  made  to  endure  after  redemption.  The 
appellants,  on  the  other  hand,  say  that  the  stipulation  in  question 
was  one  of  a  kind  usual  in  business,  and  that  it  was  in  the  nature 
not  of  a  clog  but  of  a  collateral  bargain  outside  the  actual  loan, 
which  they  only  agreed  to  make  in  order  to  obtain  the  option  itself. 
They  further  say  that  even  if  the  option  could  be  regarded  as 
within  the  doctrine  of  equity  which  forbids  the  clogging  of  the 
right  to  redeem,  that  doctrine  does  not  in  a  case  as  this  extend  to  a 
floating  charge. 

The  controversy  which  has  thus  arisen  was  brought  before 
Swinfen  Eady,  J.,  on  a  motion  for  an  Interlocutory  injunction  to 
restrain  the  respondents  from  selling  sheepskins  to  any  one  else 
than  the  appellants.  The  learned  judge  refused  this  motion  on 
the  ground  that  the  point  had  been  settled  adversely  to  the  ap- 
pellants by  decisions  of  your  Lordships'  House.  The  case  was 
brought  formally  before  the  Court  of  Appeal,  but  was  disposed  of 
there  without  argument  with  a  view  to  taking  the  point  as  speedily 
as  possible  before  your  Lordships  for  review. 

My  Lords,  before  I  refer  to  the  decisions  of  this  House  which  the 
Courts  below  have  considered  to  cover  the  case,  I  will  state  what 
I  conceive  to  be  the  broad  principles  which  must  govern  it. 

The  reason  for  which  a  Court  of  Equity  will  set  aside  the  legal 
title  of  a  mortgagee  and  compel  him  to  reconvey  the  land  on  being 
paid  principal,  interest,  and  costs  is  a  very  old  one.  It  appears  to 
owe  its  origin  to  the  influence  of  the  Church  in  the  Courts  of  the 
early  Chancellors.  As  early  as  the  Council  of  Lateran  in  1179,  we 
find,  according  to  Matthew  Paris  (Historia  Major,  1684  ed.  at  pp. 
114-115),  that  famous  assembly  of  ecclesiastics  condemning  usur- 


KREGLINGER    V,    NEW    PATAGONIA    STORAGE    CO.,    LTD  431 

ers  and  laying  clown  that  when  a  creditor  had  been  paid  his  debt  he 
should  restore  his  pledge.  It  was  therefore  not  surprising  that  the 
Court  of  Chancery  should  at  an  early  date  have  begun  to  exercise 
jurisdiction  in  pei*sonam  over  mortgagees.  This  jurisdiction  was 
merely  a  special  appHcation  of  a  more  general  power  to  relieve 
against  penalties  and  to  mould  them  into  mere  securities.  The 
case  of  the  common  law  mortgage  of  land  was  indeed  a  gross  one. 
The  land  was  conveyed  to  the  creditor  upon  the  condition  that  if 
the  money  he  had  advanced  to  the  feoffor  was  repaid  on  a  date 
and  at  a  place  named,  the  fee  simple  should  revest  in  the  latter, 
but  that  if  the  condition  was  not  strictly  and  literally  fulfilled 
he  should  lose  the  land  forever.  What  made  the  hardship  on  the 
debtor  a  glaring  one  was  that  the  debt  still  remained  unpaid  and 
could  be  recovered  from  the  feoffor  notwithstanding  that  he  had 
actually  forfeited  the  land  to  his  mortgagee.  Equity,  therefore, 
at  an  early  date  began  to  reheve  against  what  was  virtually  a 
penalty  by  compelling  the  creditor  to  use  his  legal  title  as  a  mere 
security. 

]My  Lords,  this  was  the  origin  of  the  jurisdiction  which  we  are 
now  considering,  and  it  is  important  to  bear  that  origin  in  mind. 
For  the  end  to  accomplish  which  the  jurisdiction  has  been  evolved 
ought  to  govern  and  limit  its  exercise  by  equity  judges.  That  end 
has  always  been  to  ascertain,  by  parol  evidence  if  need  be,  the  real 
nature  and  substance  of  the  transaction,  and  if  turned  out  to  be  in 
truth  one  of  mortgage  simply,  to  place  it  on  that  footing.  It  was, 
in  ordinary  cases,  only  where  there  was  conduct  which  the  Court  of 
Chancery  regarded  as  unconscientious  that  it  interfered  with 
freedom  of  contract.  The  lending  of  money,  on  mortgage  or  other- 
wise, was  looked  on  with  suspicion,  and  the  Court  was  on  the  alert 
to  discover  want  of  conscience  in  the  terms  imposed  by  lenders. 
But  whatever  else  may  have  been  the  intention  of  those  judges 
who  laid  the  foundation  of  the  modern  doctrines  with  which  we 
are  concerned  in  this  appeal,  they  certainly  do  not  appear  to  have 
contemplated  that  their  principle  should  develop  consequences 
which  would  go  far  beyond  the  necessities  of  the  case  with  which 
they  were  dealing  and  interfere  with  transactions  which  were  not 
really  of  the  nature  of  a  mortgage,  and  which  were  free  from  ob- 
jection on  moral  grounds.  Moreover,  the  principle  on  which  the 
Court  of  Chancery  interfered  with  contracts  of  the  class  under 
consideration  was  not  a  rigid  one.  The  equity  judges  looked,  not 
at  what  was  technically  the  form,  but  at  what  was  really  the  sub- 
stance of  transactions,  and  confined  the  application  of  their  rules 


432  EQUITY   RELATIONS 

to  cases  in  which  they  thought  that  in  its  substance  the  transaction 
was  oppressive.  Thus  in  Howard  v.  Harris  (1681),  1  Vera.  33;  2 
Ch.  Cas.  147,  Lord  Keeper  North  in  1683  set  aside  an  agreement 
that  a  mortgage  should  be  irredeemable  after  the  death  of  the  mort- 
gagor and  failure  of  the  heirs  of  his  body,  on  the  ground  that  such 
a  restriction  on  the  right  to  redeem  was  void  in  equity.  But  he 
went  on  to  intimate  that  if  the  money  had  been  borrowed  by  the 
mortgagor  from  his  brother,  and  the  former  had  agreed  that  if  he 
had  no  issue  the  land  should  become  irredeemable,  equity  would 
not  have  interfered  with  what  would  really  have  been  a  family 
arrangement.  The  exception  thus  made  to  the  rule,  in  cases  where 
the  transaction  includes  a  family  arrangement  as  well  as  a  mort- 
gage, has  been  recognized  in  later  authorities. 

The  principle  was  thus  in  early  days  limited  in  its  application  to 
the  accomplishment  of  the  end  which  was  held  to  justify  inter- 
ference of  equity  with  freedom  of  contract.  It  did  not  go  further. 
As  established  it  was  expressed  in  three  ways.  The  most  general 
of  these  was  that  if  the  transaction  was  once  found  to  be  a  mort- 
gage, it  must  be  treated  as  always  remaining  a  mortgage  and  noth- 
ing but  a  mortgage.  That  the  substance  of  the  transaction  must 
be  looked  to  in  applying  this  doctrine  and  that  it  did  not  apply 
to  cases  which  were  only  apparently  or  technically  within  it  but 
were  in  reality  something  more  than  cases  of  mortgage,  Howard  v. 
Harris  (1681),  1  Vern.  33;  2  Ch.  Cas.  147,  and  other  authorities 
shew.  It  was  only  a  different  application  of  the  paramount  doc- 
trine to  lay  it  down  in  the  form  of  a  second  rule  that  a  mortgagee 
should  not  stipulate  for  a  collateral  advantage  which  would  make 
his  remuneration  for  the  loan  exceed  a  proper  rate  of  interest. 
The  legislature  during  a  long  period  placed  restrictions  on  the 
rate  of  interest  which  could  legally  be  exacted.  But  equity  went 
beyond  the  limits  of  the  statutes  which  limited  the  interest,  and 
was  ready  to  interfere  with  any  usurious  stipulation  in  a  mortgage. 
In  so  doing  it  was  influenced  by  the  public  poHcy  of  the  time. 
That  policy  has  now  changed,  and  the  Acts  which  limited  the  rate 
of  interest  have  been  repealed.  The  result  is  that  a  collateral  ad- 
vantage may  now  be  stipulated  for  by  the  mortgagee  provided 
that  he  has  not  acted  unfairly  or  oppressively,  and  provided  that 
the  bargain  does  not  conflict  with  the  third  form  of  the  principle. 
This  is  that  a  mortgage  (subject  to  the  apparent  exception  in  the 
case  of  family  arrangements  to  which  I  have  already  alluded) 
cannot  be  made  irredeemable,  and  that  any  stipulation  which  re- 
stricts or  clogs  the  equity  of  redemption  is  void.    It  is  obvious  that 


KREGLINGER   V.    NEW    PATAGONIA    STORAGE    CO.,    LTD.         433 

the  reason  for  the  doctrine  in  this  form  is  the  same  as  that  which 
gave  rise  to  the  other  forms.  It  is  simply  an  assertion  in  a  different 
way  of  the  principle  that  once  a  mortgage  always  a  mortgage  and 
nothing  else. 

Aly  Lords,  the  rules  I  have  stated  have  now  been  applied  by 
Courts  of  Equity  for  nearly  three  centuries,  and  the  Vjooks  are  full 
of  illustrations  of  their  application.  But  what  I  have  pointed  out 
shews  that  it  is  inconsistent  with  the  objects  for  which  they  were 
established  that  these  rules  should  crystallize  into  technical 
language  so  rigid  that  the  letter  can  defeat  the  underlying  spirit 
Rud  purpose.  Their  application  must  correspond  with  the  prac- 
tical necessities  of  the  time.  The  rule  as  to  collateral  advantages, 
for  example,  has  been  much  modified  by  the  repeal  of  the  usury 
laws  and  by  the  recognition  of  modern  varieties  of  commercial 
bargaining.  In  Biggs  v.  Hoddinott,  [1898]  2  Ch.  307,  it  was  held 
that  a  brewer  might  stipulate  in  a  mortgage  made  to  him  of  an 
hotel  that  during  the  five  years  for  which  the  loan  was  to  continue 
the  mortgagors  would  deal  with  him  exclusively  for  malt  liquor. 
In  the  seventeenth  and  eighteenth  centuries  a  Court  of  Equity 
•could  hardly  have  so  decided,  and  the  judgment  illustrates  the 
elastic  character  of  equity  jurisdiction  and  the  power  of  equity 
judges  to  mould  the  rules  which  they  apply  in  accordance  with  the 
exigencies  of  the  time.  The  decision  proceeded  on  the  ground 
that  a  mortgagee  may  stipulate  for  a  collateral  advantage  at  the 
time  and  as  a  term  of  the  advance,  provided,  first,  that  no  unfair- 
ness is  shewn,  and,  secondly,  that  the  right  to  redeem  is  not  thereby 
clogged.  It  is  no  longer  true  that,  as  was  said  in  Jennings  v.  Ward, 
2  Vern.  520,  "a  man  shall  not  have  interest  for  his  money  and  a 
collateral  advantage  besides  for  the  loan  of  it."  Unless  such  a 
bargain  is  unconscionable  it  is  now  good.  But  none  the  less  the 
other  and  wider  principle  remains  unshaken,  that  it  is  the  essence 
of  a  mortgage  that  in  the  eye  of  a  Court  of  Equity  it  should  be  a 
mere  security  for  mone}^,  and  that  no  bargain  can  be  validly  made 
which  will  prevent  the  mortgagor  from  redeeming  on  payment 
of  what  is  due,  including  principal,  interest,  and  costs.  He  may 
stipulate  that  he  will  not  pay  off  his  debt,  and  so  ledeem  the  mort- 
gage, for  a  fixed  period.  But  whenever  a  right  to  redeem  arises 
out  of  the  doctrine  of  equitj-,  he  is  precluded  from  fettering  it. 
This  principle  has  become  an  integral  part  of  our  system  of  juris- 
prudence and  must  be  faithfully  adhered  to. 

My  Lords,  the  question  in  the  present  case  is  whether  the  right  to 
redeem  has  been  interfered  with.    And  this  must,  for  the  reasons 


434  EQUITY   RELATIONS 

to  which  I  have  adverted  in  considering  the  history  of  the  doctrine 
of  equity,  depend  on  the  answer  to  a  question  which  is  primarily 
one  of  fact.  What  was  the  true  character  of  the  transaction?  Did 
the  appellants  make  a  bargain  such  that  the  right  to  redeem  was 
cut  down,  or  did  they  simply  stipulate  for  a  collateral  undertaking, 
outside  and  clear  of  the  mortgage,  which  would  give  them  an  ex- 
clusive option  of  purchase  of  the  sheepskins  of  the  respondents? 
The  question  is  in  my  opinion  not  whether  the  two  contracts  were 
made  at  the  same  moment  and  evidenced  by  the  same  instrument, 
but  whether  they  were  in  substance  a  single  and  undivided  con- 
tract or  two  distinct  contracts.  Putting  aside  for  the  moment 
considerations  turning  on  the  character  of  the  floating  charge, 
such  an  option  no  doubt  affects  the  freedom  of  the  respondents 
in  carrying  on  their  business  even  after  the  mortgage  has  been 
paid  off.  But  so  might  other  arrangements  which  \vould  be  plainly 
collateral,  an  agreement,  for  example,  to  take  permanently  into  the 
firm  a  new  partner  as  a  condition  of  obtaining  fresh  capital  in  the 
form  of  a  loan.  The  question  is  one  not  of  form  but  of  substance, 
and  it  can  be  answered  in  each  case  only  by  looking  at  all  the  cir- 
cumstances, and  not  by  mere  reliance  on  some  abstract  principle, 
or  upon  the  dicta  which  have  fallen  obiter  from  judges  in  other  and 
different  cases.  Some,  at  least,  of  the  authorities  on  the  subject 
disclose  an  embarrassment  which  has,  in  my  opinion,  arisen  from 
neglect  to  bear  this  in  mind.  In  applying  a  principle  the  ambit 
and  validity  of  which  depend  on  confining  it  steadily  to  the  end 
for  which  it  was  established,  the  analogies  of  previous  instances 
where  it  has  been  applied  are  apt  to  be  misleading.  For  each 
case  forms  a  real  precedent  only  in  so  far  as  it  affirms  a  principle, 
the  relevancy  of  which  in  other  cases  turns  on  the  true  character 
of  the  particular  transaction,  and  to  that  extent  on  circumstances. 

My  Lords,  if  in  the  case  before  the  House  your  Lordships  arrive 
at  the  conclusion  that  the  agreement  for  an  option  to  purchase  the 
respondents'  sheepskins  was  not  in  substance  a  fetter  on  the 
exercise  of  their  right  to  redeem,  but  was  in  the  nature  of  a  col- 
lateral bargain  the  entering  into  which  was  a  preliminary  and 
separable  condition  of  the  loan,  the  decided  cases  cease  to  present 
any  great  difficulty.  In  questions  of  this  kind  the  binding  force  of 
previous  decisions,  unless  the  facts  are  indistinguishable,  depends 
on  whether  they  establish  a  principle. 

What  is  vital  in  the  appeal  now  under  consideration  is  to  classify 
accurately  the  transaction  between  the  parties.  What  we  have  to 
do  is  to  ascertain  from  scrutiny  of  the  circumstances  whether  there 


KREGLINGER    V.    NEW   PATAGONIA    STORAGE    CO.,    LTD.         435 

has  really  been  an  attempt  to  effect  a  mortgage  with  a  provision 
preventing  redemption  of  what  was  pledged  merely  as  security 
for  payment  of  the  amount  of  the  debt  and  any  charges  besides 
that  may  legitimately  be  added.  It  is  not,  in  my  opinion,  conclu- 
sive in  favour  of  the  appellants  that  the  security  assumed  the  form 
of  a  floating  charge.  A  floating  charge  is  not  the  less  a  pledge  be- 
cause of  its  floating  character,  and  a  contract  which  fetters  the 
right  to  redeem  on  which  equity  insists  as  regards  all  contracts  of 
loan  and  security  ought  on  principle  to  be  set  aside  as  readily  in 
the  case  of  a  floating  security  as  in  any  other  case.  But  it  is  ma- 
terial that  such  a  floating  charge,  in  the  absence  of  bargain  to  the 
contrary  effect,  permits  the  assets  to  be  dealt  with  freely  by  the 
mortgagor  until  the  charge  becomes  enforceable.  If  it  be  said  that 
the  undertaking  of  the  respondents  which  was  charged  extended 
to  their  entire  business,  including  the  right  to  dispose  of  the  skins 
of  which  they  might  from  time  to  time  become  possessed,  the  com- 
ment is  that  at  least  they  were  to  be  free,  so  long  as  the  security 
remained  a  floating  one,  to  make  contracts  in  the  ordinary  course 
of  business  in  regard  to  these  skins.  If  there  had  been  no  mortgage 
such  a  contract  as  the  one  in  question  would  have  l^een  an  ordinary 
incident  in  such  a  business.  We  are  considering  the  simple  ques- 
tion of  what  is  the  effect  on  the  right  to  redeem  of  having  inserted 
into  the  formal  instrument  signed  when  the  money  was  borrowed 
an  ordinaiy  commercial  contract  for  the  sale  of  skins  extending 
over  a  period.  It  appears  that  it  was  the  intention  of  the  parties 
that  the  grant  of  the  security  should  not  affect  the  power  to  enter 
into  such  a  contract  either  with  strangers  or  with  the  appellants, 
and  if  so  I  am  unable  to  see  how  the  equity  of  redemption  is  af- 
fected. No  doubt  it  is  the  fact  that  on  redemption  the  respondents 
will  not  get  back  their  business  as  free  from  obligation  as  it  was 
before  the  date  of  the  secm-ity.  But  that  may  well  be  because 
outside  the  security  and  consistently  with  its  terms  there  was  a 
contemporaneous  but  collateral  contract,  contained  in  the  same 
document  as  constituted  the  security,  but  in  substance  independ- 
ent of  it.  If  it  was  the  intention  of  the  parties,  as  I  think  it  was,  to 
enter  into  this  contract  as  a  condition  of  the  respondents  getting 
their  advance,  I  know  no  reason  either  in  morals  or  in  equity  which 
ought  to  prevent  this  intention  from  being  left  to  have  its  effect. 
What  was  to  be  capable  of  redemption  was  an  undertaking  which 
was  deliberately  left  to  be  freely  changed  in  its  details  by  ordinary 
business  transactions  with  which  the  mortgage  was  not  to  interfere. 
Had  the  charge  not  been  a  floating  one  it  might  have  been  more 


436  EQUITY   RELATIONS 

difficult  to  give  effect  to  this  intention.  In  Noakes  &  Co.  v.  Rice, 
[1902]  A.  C.  24,  this  difficulty  is  illustrated,  for  the  House  held  that 
what  had  been  inserted  in  the  shape  of  a  covenant  by  the  mortgagor 
to  buy  the  beer  of  the  mortgagee  after  redemption  of  the  public- 
house  mortgaged  was  really  a  term  of  the  mortgage  and  was  in- 
operative as  being,  not  merely  a  collateral  agreement,  but  in  truth 
a  restriction  on  the  right  to  get  back  the  security  free  from  the 
terms  of  the  mortgage.  That  was  the  case  of  the  mortgage  of  a 
specific  property.  The  decision  that  the  transaction  was  what  it 
was  held  to  be  is  at  all  events  readily  intelligible.  In  Bradley  v. 
Carritt,  [1903]  A.  C.  253,  it  was  decided  that  the  mortgagor  of 
shares  in  a  tea  company  who  had  covenanted  that  he  would  use 
his  best  endeavours  to  secure  that  ^ways  thereafter  the  mortgagee 
should  have  the  sale  of  the  company's  tea  had  permanently  fet- 
tered himself  in  the  free  disposition  and  enjoyment  of  the  shares. 
It  was  held  that  though  the  covenant  did  not  operate  in  rem  on  the 
shares  it  amounted  to  a  device  or  contrivance  designed  to  impede 
redemption.  The  decision  was  a  striking  one.  It  was  not  unani- 
mous, for  Lord  Lindley  dissented  from  the  conclusions  of  Lord 
Macnaghten  and  Lord  Davey.  It  is  binding  on  your  Lordships 
in  any  case  in  which  the  transaction  is  really  of  the  same  kind, 
although  it  does  not  follow  that  all  the  dicta  in  the  judgment  of 
those  of  your  Lordships'  House  who  were  in  a  majority  must  be 
taken  as  of  binding  authority.  And  it  certainly  cannot,  in  my 
opinion,  be  taken  as  authoritatively  laying  down  that  the  mere 
circumstance  that  after  redemption  the  property  redeemed  may 
not,  as  the  result  of  some  bargain  made  at  the  time  of  the  mort- 
gage, be  in  the  same  condition  as  it  was  before  that  time,  is  conclu- 
sive against  the  validity  of  that  bargain.  To  render  it  invahd  the 
bargain  must,  when  its  substance  is  examined,  turn  out  to  have 
formed  part  of  the  terms  of  the  mortgage  and  to  have  really  cut 
down  a  true  right  of  redemption.  I  think  that  the  tendency  of 
recent  decisions  has  been  to  lay  undue  stress  on  the  letter  of  the 
principle  which  hmits  the  jurisdiction  of  equity  in  setting  aside 
contracts.  The  origin  and  reason  of  the  principle  ought,  as  I  have 
already  said,  to  be  kept  steadily  in  view  in  applying  it  to  fresh 
cases.  There  appears  to  me  to  have  grown  up  a  tendency  to  look 
to  the  letter  rather  than  to  the  spirit  of  the  doctrine.  The  true 
view,  is,  I  think,  that  judges  ought  in  this  kind  of  jurisdiction  to 
proceed  cautiously,  and  to  bear  in  mind  the  real  reasons  which  have 
led  Courts  of  Equity  to  insist  on  the  free  right  to  redeem  and  the 
limits  within  which  the  purpose  of  the  rule  ought  to  confine  its 


KREGLINGER   V.    NEW    PATAGONIA    STORAGE    CO.,    LTD.         437 

scope.  I  cannot  but  think  that  the  validity  of  the  bargain  in  sucli 
cases  as  Bradley  v.  Carritt,  [1903]  A.  C.  253,  and  Santley  v.  Wilde, 
[1899]  2  Ch.  474,  might  have  been  made  free  from  serious  question 
if  the  parties  had  chosen  to  seek  what  would  have  been  substan- 
tially the  same  result  in  a  different  form.  For  form  maj^  be  verj^ 
important  when  the  question  is  one  of  the  construction  of  ambigu- 
ous words  in  which  people  have  expressed  their  intentions.  I  will 
add  that,  if  I  am  right  in  the  view  which  I  take  of  the  authorities, 
there  is  no  reason  for  thinking  that  they  establish  another  rule 
suggested  by  the  learned  counsel  for  the  respondents,  that  even  a 
mere  collateral  advantage  stipulated  for  in  the  same  instrument 
as  constitutes  the  mortgage  cannot  endure  after  redemption.  The 
dicta  on  which  he  relied  are  really  illustrations  of  the  other  prin- 
ciples to  which  I  have  referred. 

The  result  of  the  consideration  I  have  given  to  this  appeal  is 
that  I  think  that  the  contention  of  the  appellants  is  right.  That 
they  should  succeed  on  a  point  which  was  little  if  at  all  considered 
in  the  Courts  below  is  presumably  due  to  the  question  raised  having 
been  thought  to  be  covered  by  authority.  That  does  not  affect  the 
appellants'  right  to  argue  the  real  point  here.  The  parties  have 
apparently  agreed  that  the  result  of  the  motion  should  be  consid- 
ered as  disposing  of  the  action,  and  that  if  on  the  point  which  has 
been  argued  the  decision  is  for  the  appellants  they  should  be  de- 
clared to  be  entitled  to  the  injunction  asked  for.  I  think  that  the 
simplest  way  of  giving  effect  to  this  agreement  on  the  footing  that 
the  appeal  is  to  be  decided  in  the  appellants'  favour  will  be  to  de- 
clare them  entitled  to  an  injunction  in  terms  of  the  notice  of  mo- 
tion and  to  the  costs  here  and  in  the  Court  of  Appeal,  with  the 
]iberty  to  apply  to  the  Chancery  Division  to  dispose  of  the  action. 
I  move  accordingly. 

Lord  Parker  of  Waddington.  My  Lords,  the  defendants 
in  this  case  are  appealing  to  the  equitable  jurisdiction  of  the  Court 
for  relief  from  a  contract  which  they  admit  to  be  fair  and  reason- 
able and  of  which  they  have  already  enjoyed  the  full  advantage. 
Their  title  to  relief  is  based  on  some  equity  which  they  say  is  in- 
herent in  all  transactions  in  the  nature  of  a  mortgage.  They  can 
state  no  intelligible  principle  underlying  this  alleged  equity,  but 
contend  that  your  Lordships  are  bound  by  authority.  That  the 
Court  should  be  asked  in  the  exercise  of  its  equitable  jurisdiction 
to  assist  in  so  inequitable  a  proceeding  as  the  repudiation  of  a  fair 
and  reasonable  bargain  is  somewhat  startUng.  .  .  . 


438  EQUITY    RELATIONS 

]\Iy  Lord:?,  I  desire,  in  connection  with  what  I  have  just  said,  to 
add  a  few  words  on  the  maxims  in  which  attempts  have  been  made 
to  sum  up  the  equitable  principles  applicable  to  mortgage  trans- 
actions. I  refer  to  the  maxims,  "  Once  a  mortgage,  always  a  mort- 
gage," or  "A  mortgage  cannot  be  made  irredeemable."  Such  max- 
ims, how^ever  convenient,  afford  little  assistance  where  the  Court 
has  to  deal  with  a  new  or  doubtful  case. 

My  Lords,  after  the  most  careful  consideration  of  the  authorities 
I  think  it  is  open  to  this  House  to  hold,  and  I  invite  your  Lordships 
to  hold,  that  there  is  now  no  rule  in  equity  which  precludes  a  mort- 
gagee, whether  the  mortgage  be  made  upon  the  occasion  of  a  loan 
or  otherwise,  from  stipulating  for  any  collateral  advantage,  pro- 
vided such  collateral  advantage  is  not  either  (1)  unfair  and  un- 
conscionable, or  (2)  in  the  nature  of  a  penalty  clogging  the  equity 
of  redemption,  or  (3)  inconsistent  with  or  repugnant  to  the  con- 
tractual and  equitable  right  to  redeem. 

Order  of  the  Court  of  Appeal  reversed,  and  declare  that  the  appel- 
lants are  entitled  to  an  injunction  in  the  terms  of  the  notice  of  motion 
with  liberty  to  apply  to  the  Chancery  Division  to  dispose  of  the  action. 


Tholen  v.  Duffy,  7  Kans.  405  (1871).  Brewer,  J.  The 
stipulation  in  the  mortgage  in  regard  to  attorney's  fees  is  in  these 
words:  "And  the  said  parties  of  the  first  part  hereby  agree  that  ten 
per  cent,  upon  the  amount  due  on  said  note  at  time  of  any  judgment 
thereon  shall  be  added  to  the  same  and  judgment  rendered  therefor 
for  attorney's  fees  for  collection  and  services."  The  learned  judge 
who  tried  the  case  charged  the  jury  that  this  stipulation  was  valid, 
and  that  they  might  add  to  the  amount  found  due  upon  the  note 
ten  per  cent,  therefore,  and  bring  in  a  verdict  for  such  sum.  The 
verdict  they  returned  really  included  only  between  six  and  seven 
per  cent,  for  attorney's  fees.  Stipulations  like  this  have  been  sus- 
tained by  the  decisions  of  many  courts,  and  properly  so  (7  Watts, 
126;  51  Penn.  St.  78;  3  Wis.  454;  10  Wis.  41;  12  Wis.  179,  452; 
15  Wis.  522;  16  Wis.  672;  8  Blackf.  140;  1  Nev.  161;  2  Nev.  199; 
21  La.  An.  607). 

It  does  not  violate  the  usury  law,  because  it  is  no  stipulation  to 
pay  for  the  use  of  the  money  borrowed,  but  only  an  agreement  to 
compensate  the  mortgagee  for  the  expenses  of  compelling  the  mort- 
gagor to  perform  his  contract.  If  the  mortgagor  pay  the  money 
borrowed  at  the  time  it  becomes  due,  as  he  has  promised  to  do,  he 
incurs  no  loss  by  reason  of  this  clause  in  the  mortgage.     He  is. 


THOLEN   V.    DUFFY  439 

wholly  released  by  the  payment  of  the  money  borrowed  and  the 
stipulated  interest.  Where  by  the  term  of  a  contract  a  party  can 
discharge  himself  by  paying  the  real  amount  due,  the  transaction 
is  not  usurious  (Bac.  Abr.,  title,  Usury,  6;  Billingsley  v.  Dean,  11 
Ind.  331;  Lawrence  v.  Cowlse,  13  111.  577;  Gould  v.  The  Bishop 
Hill  Co.,  35  111.  325).  Nor  is  it  against  pubhc  poHcy  that  the 
expense  of  a  litigation  should  be  borne  by  the  party  whose  breach 
of  his  contract  necessitates  such  htigation.  On  the  contrary,  it 
accords  full}'-  with  the  soundest  principles.  Our  statutes,  as  well 
as  those  of  nearly,  if  not  quite,  all  of  the  States,  provide  that  the 
costs— using  the  term  in  the  limited  sense  as  embracing  the  amounts 
due  the  sheriff,  the  clerk,  and  other  officers  of  the  court,  for  their 
services  in  the  case — shall  be  paid  by  the  losing  party.  The  theory 
is  that  the  determination  of  the  suit  has  shown  that  his  wrong 
caused  the  litigation,  and,  therefore,  he  should  bear  the  expense. 
And  in  many  States  the  court  is  authorized  to  award  to  the  success- 
ful party,  in  addition  to  the  amount  found  due  and  the  court  ex- 
penses, certain  sums  for  his  attorney's  costs.  Our  statutes  do  not 
provide  for  this  additional  allowance.  But  this  omission  to  provide 
for  such  compensation  in  all  cases  is  no  argument  against  the  right 
of  the  parties  to  contract  for  it  in  some.^ 

1  This    represents    the    prevailing  tion  of  the  sum  of  money  secured  by 

view  in  the  United  States.    Pierce  v.  the  mortgage  should  not  be  made  a 

Kneeland,     16     Wis.     672     (1863);  part  of  the  judgment  or  decree  in 

Weatherby  v.   Smith,   30   Iowa,    131  case  the  mortgage  had  to  be  fore- 

(1870).     See,  also,  Foote  v.  Sprague,  closed." — Per  Scott,  J.,  in  Clawson 

13  Kans.  155  (1874).  v.  Mimson,  55  111.  394  (1870).    And 

"In  the  case  now  before  us  it  is  see  Barton  v.  Farmers' National  Bank, 

agreed  in  express  terms  by  the  mort-  122  111.  352  (1887). 

gagor,  in  case  of  default  in  payment,  In   a   few   States,    however,    such 

that  the  attorney's  fee  shall  be  paid  stipulations  are  regarded  as  usurious 

as  a  part  of  the  costs  of  collecting  and      oppressive.        Thomnsson      v. 

the  sum  of  money  secured  by  the  Townsend,  10  Bush  (Ky.),  Hi  (1873); 

mortgage.      The  agreement   to   pay  Myer  v.  Hart,  40  Mich.  517  (1879); 

such  fees  is  a  part  of  the  security  Kittermaster  v.  Brossard,   105  Mich, 

itself,   and  no    reason   is   perceived  219  (1895). 
why  the  costs  incident  to  the  coUec- 


440  EQUITY   RELATIONS 

DALY  V.  MAITLAND 

Supreme  Court  of  Pennsylvania,  1879 

(88  Pa.  St.  384) 

Scire  facias  sur  mortgage  by  Henry  IVIaitland  against  Henry  ^I. 
Daly  and  others,  executors  of  John  Daly,  deceased. 

The  mortgage  was  for  $14,000,  dated  May  6th,  1871,  for  five 
years,  between  John  Daly  and  Henry  Maitland.  John  Daly  hav- 
ing died  before  the  commencement  of  the  suit,  the  writ  was  issued 
against  the  executors  and  trustees  under  his  will  after  the  maturity 
of  the  mortgage. 

The  pleas  were  nil  debet  and  payment. 

The  mortgage  contained  the  following  clause,  "and  provided  also 
that  it  shall  and  may  be  lawful  to  and  for  the  said  Henry  Maitland, 
his  heirs,  executors,  administrators,  and  assigns,  when  and  as  soon 
as  the  principal  sum  hereby  secured  shall  become  due  ...  to  sue 
out  forthwith  a  scire  facias  upon  this  indenture  of  mortgage  and 
to  proceed  therein  to  judgment  and  execution  for  the  recovery  of 
the  whole  of  the  said  principal  debt  and  all  interest  and  taxes  due 
thereon,  together  with  an  attorney's  commission  for  collection,  viz. : 
five  per  cent.,  besides  costs  of  suit,  without  any  stay,  any  law  or 
usage  to  the  conti'ary  notwithstanding." 

On  the  trial,  after  the  offer  of  the  mortgage  in  evidence,  the  de- 
fendants admitted  plaintiff's  claim  for  the  principal  of  the  mortgage 
and  interest,  but  resisted  his  claim  for  five  per  cent,  commission  on 
the  principal  of  the  mortgage. 

The  defendants  submitted  the  following  points,  which  the  court, 
Mitchell,  J.,  refused: 

1.  That  the  plaintiff  is  entitled  to  recover  upon  the  mortgage 
above  the  amount  of  the  mortgage  and  interest,  a  reasonable  attor- 
ney fee  for  the  collection  of  the  mortgage,  and  what  is  a  reasonable 
fee  must  be  proved  by  plaintiff  to  recover  it. 

2.  That  the  plaintiff  is  entitled  to  recover  under  the  mortgage 
sued  on  onl}^  a  reasonable  attorney  fee  in  addition  to  the  amount 
of  the  mortgage  and  interest. 

The  court  charged  as  follows: 

"The  plaintiff  is  entitled  to  recover  the  full  amount  of  his  del)t 
covenanted  in  the  mortgage  to  be  paid,  including  the  five  per  cent. 
upon  the  amount  of  the  mortgage  debt  for  collection,  that  l)eing 


DALY    V.    MAITLAND  441 

expressly  stipulated  for  in  the  mortgage  to  be  paid  on  a  contin- 
gency, which  is  admitted  to  have  happened." 

The  verdict  was  for  $14,862.40,  which  included  interest  and  the 
five  per  cent,  commission.  After  judgment  the  defendants  took 
this  writ  and  assigned  for  error  the  refusal  of  the  foregoing  points 
^nd  the  portion  of  the  charge  noted. 

Chief  Justice  Sharswood  delivered  the  opinion  of  the  court 
March  17th,  1879. 

In  Huling  v.  Drcxel,  7  Watts,  126,  it  was  decided  by  this  court 
that  a  stipulation  in  a  mortgage  that,  in  the  event  of  the  necessity 
of  proceeding  to  recover  the  mortgage  by  suit,  the  mortgagee  shall 
be  entitled,  in  addition  to  the  debt  and  interest,  to  damages  for 
cost  and  expenses  incident  thereto,  was  not  usurious,  and  might  he 
enforced  in  the  scire  facias.  In  consequence  of  this  decision,  it  has 
become  common  to  insert  a  provision  not  only  in  mortgages,  but 
notes  and  other  instruments  for  the  payment  of  money,  that  the 
creditor,  in  the  event  of  being  obliged  to  resort  to  a  suit,  shall 
recover  a  certain  percentage  as  commissions  to  the  attorney  who  is 
retained  by  him  to  collect  the  debt.  This  commission,  it  has  been 
held,  does  not  belong  to  the  attorney,  but  to  the  creditor.  It  can- 
not be  collected  as  costs,  but  must  be  included  in  the  judgment 
(Mahoning  County  Bank's  Appeal,  8  Casey,  158;  McAllister's  Ap- 
peal, 9  P.  F.  Smith,  204;  Faulkner  v.  Wilson,  3  W.  N.  C.  339; 
Schmidt  &  Friday's  Appeal,  1  Norris,  524).  In  Robinson  v.  Loumis, 
1  P.  F.  Smith,  78,  it  was  ruled  that  such  commission  was  not  a 
penalty,  but  an  agreed  compensation  to  the  mortgagee  for  expenses 
incurred  by  the  default  of  the  mortgagor. 

It  is  undoubtedly  true  that  the  parties  to  a  contract  may  law- 
fully agree  that  the  damages  in  case  of  a  breach  shall  be  Uquidated 
at  a  certain  amount.  Equity  will  not  relieve  against  such  a  con- 
tract fairly  entered  into,  unless  it  is  evidently  a  penalty.  This 
principle  of  liquidated  damages  is  not  apphcable,  however,  to  a 
contract  for  the  loan  of  money— at  least  such  stipulation  is  subject 
to  the  control  of  courts  of  equity.  As  in  the  days  of  Solomon, 
"the  borrower  is  servant  to  the  lender,"  and  courts  of  equity  from 
the  earliest  period  have  assumed  the  jurisdiction  of  relieving  the 
])orrower  from  unreasonable  and  oppressive  stipulations,  exacted 
from  his  necessities,  altogether  apart  from  the  statutes  against 
usury.  Especially  has  this  always  been  the  case  as  to  mortgages. 
Agreements  embarrassing  or  restraining  the  equity  of  redemption 
have  invariably  been  set  aside.     The  stipulated  commission  for 


442  EQUITY   RELATIONS 

the  attorney  may  be  so  far  beyond  the  ordinary  rate  charged  for 
such  services  as  to  require  imperatively  the  interposition  of  the 
equitable  powers  of  the  court.  Equity  has  always  been  a  part 
of  the  law  of  Pennsylvania.  In  the  administration  of  equitable 
principles  it  is  the  court  and  not  the  jury  who  exercise  the  func- 
tions of  the  chancellor,  even  where  the  action  is  in  the  common- 
law  form.  The  jury,  like  the  same  tribunal  in  an  issue  directed 
by  the  chancellor,  decide  disputed  facts;  but  it  is  the  court  that 
must  be  satisfied  and  apply  the  equity  on  the  facts  found  or  un- 
disputed. If  they  think  an  equitable  title  to  relief  not  made  out 
by  the  proofs,  it  is  their  duty  so  to  direct  the  jury,  and  contra  if 
they  think  the  equity  has  been  established.  These  rules  are  so 
familiar  and  well  settled  that  it  would  be  a  work  of  lupererogation 
to  cite  the  numerous  cases  which  support  them. 

We  think  these  principles  apply  to  the  questions  raised  upon 
this  record.  The  lender  of  money  on  any  species  of  security  cannot 
exact  an  unreasonable  stipulation  in  the  shape  of  an  agreed  liquida- 
tion of  damages.  Equity  interposes  her  shield  to  protect  the  bor- 
rower. The  debtor  in  cases  of  this  kind  will  readily  yield  to  the 
demand  of  the  creditor,  as  he  would  be  apt  to  regard  collection 
by  suit  as  a  remote  and  improbable  contingency.  Even  at  law 
what  is  reasonable  is  often,  indeed,  a  question  of  fact,  but  in  many 
cases  it  is  a  pure  question  of  law.  Thus,  notice  of  the  non-payment 
of  a  promissory  note,  though  it  was  at  first  submitted  to  the  jury 
to  decide  whether  it  was  within  reasonable  time,  is  now  unques- 
tionably the  exclusive  province  of  the  court;  so  it  is  now  held  that 
after  a  lapse  of  seven  years  an  abandonment  of  a  title  by  settle- 
ment is  a  conclusive  presumption  of  law.  No  court  has  ever 
thought  of  sending  an  issue  to  a  jury  to  determine  what  is  reason- 
able compensation  to  trustees.  They  would  be  a  tribunal  entirely 
unsafe  to  intrust  with  such  a  question.  These  decisions  have  been 
reached  by  the  necessity  of  certainty  in  the  rules  in  such  cases. 
Many  other  illustrations  could  be  given.  It  is  important,  unless 
we  are  prepared  to  say  that  the  lender  may  stipulate  for  any 
amount  as  commissions  for  the  collection  of  his  debt,  that  there 
should  be  some  more  certain  rule  than  could  be  reached  by  sub- 
mitting every  case  to  a  jury.  It  would  practically  in  a  great  num- 
ber of  cases  have  the  effect  of  destroying  the  stipulation  altogether. 
If  the  question  must  in  every  case  be  referred  to  a  jury,  the  creditor 
will  abandon  the  claim  sooner  than  encounter  the  delay  and  the 
risk  of  a  very  small  sum  being  allowed.  The  court,  from  practical 
knowledge  of  professional  work,  are  able  to  say  in  every  particular 


DALY   V.    MAITLAXD  443 

case  what  ought  to  be  the  compensation  or  rate  of  commissions 
for  collecting  a  debt  by  suit.  Whatever  is  stipulated  beyond  a 
reasonable  rate  should  be  relieved  against  upon  equitable  prin- 
ciples. Certainly,  no  certain  commission  can  be  determined 
upon  to  be  applied  to  all  cases.  As  responsibility,  as  well  as  labor 
and  skill,  is  involved,  in  reason  and  the  usage  of  the  profession 
it  depends  upon  the  amount  collected,  but  not  absolutely  so.  If 
there  should  be  no  defence  to  the  mortgage  or  other  instrument  of 
writing  for  the  payment  of  money,  the  court  in  giving  judgment  can 
decide  whether  the  stipulated  rate  is  too  large,  and  enter  judgment 
for  what  is  right.  Should,  however,  a  defence  be  set  up  in  whole  or 
in  part,  and  the  case  necessarily  go  to  a  jury,  it  would  be  the  prov- 
ince of  the  court  to  instruct  the  jury  what,  under  all  the  circum- 
stances, should  be  allowed,  of  course  not  exceeding  the  agreed  rate. 

It  does  not  appear  by  the  paper-books  that  there  was  in  this  case 
any  rule  for  judgment  for  want  of  an  affidavit  of  defence,  though 
it  does  appear  that  there  was  no  other  defence  than  the  amount  of 
the  collection  fee.  Had  there  been  such  a  rule,  the  court  should 
have  decided  the  question,  and  not  have  sent  the  case  to  the  jury. 
We  think  the  learned  judge  below  was  right  in  refusing  to  leave  it 
to  the  jury  to  determine  the  rate  of  commission,  but  he  was  wrong 
in  instructing  them  to  find  the  full  amount  agreed  upon.  Five  per 
cent,  upon  $14,000,  in  other  words,  S700,  was  far  beyond  what  was 
reasonable,  even  in  view  of  the  fact  that  the  defendant  below  had 
interposed  a  defence  against  the  commission,  and  that  the  case 
might  be  carried  by  writ  of  error  to  this  court.  We  think  even 
under  these  circumstances  two  per  cent,  would  have  been  an  ample 
and  liberal  allowance,  and  the  jury  should  have  been  so  instructed. 
In  general,  this  court  will  not  review  the  exercise  of  a  sound  dis- 
cretion by  an  inferior  court  upon  such  a  question,  and  the  presump- 
tion will  always  be  in  favor  of  their  decision  unless  it  is  plainly 
excessive,  or,  as  appears  to  have  been  the  case  here,  founded  on  the 
mistaken  idea  that  they  had  no  equitable  power  to  interpose  and 
moderate  the  agreed  amount. 

Judgment  reversed,  and  venire  facias  de  novo  awarded} 

Mercur,  J.,  dissented. 

'  Wilson  V.  Oil,   173   Pa.   St.  253  As  to  fixino;  the  amount  of  costa 

(1896),  accord.     Clawson  v.  Munson,  in  foreclosure,  the  subject  is  often 

65  111.  394  (1870),  contra.  regulated    by    statute.       Thus    see, 

C/.    Uhlfelder    &    Co.    v.    Carters'  N.    Y.    Code    Civ.    Proc,    §§  3252- 

Admr.,  64  Ala.  527  (1879).  3254. 


CHAPTER  II     (Continued) 
Section  IV— Tacking  Collateral  Claims 

BAXTER  V.  MANNING 

High  Court  of  Chancery,  1684 

(1  Vern.  244) 

The  plaintiff  makes  a  mortgage  of  his  estate  to  the  defendant,, 
and  afterwards  the  mortgagee  advances  and  lends  more  mone\' 
unto  the  plaintiff,  the  mortgagor,  on  his  bond.  The  plaintif!" 
brings  his  bill  to  redeem.  The  defendant  insists  to  have  his  bond 
debt  as  well  as  the  mortgage-money  paid  him. 

Per  Curiam.^  Although  there  is  no  special  agreement  proved 
in  this  case,  that  the  land  should  stand  as  a  security  for  the  bond 
debt,  yet  the  mortgagor  shall  not  redeem  without  paying  both.- 


Challis  v.  Casborn,  Finch,  Pre.  Ch.  407  (1715).  Before  Lord 
CowPER,  L.  C.  In  this  case  it  was  said  by  Mr.  Vernon,  and  agreed 
to  by  the  court,  that  if  a  man  has  a  debt  owing  to  him  by  mortgage 
and  another  on  bond  from  the  same  person,  that  he  cannot  tack 
them  together  against  the  mortgagor,  but  that  he  shall  be  let  into 
a  redemption  on  payment  of  the  mortgage-money  only;  but  the 
heir  in  such  case  shall  not  be  let  into  a  redemption  without  payment 
of  both,  because  the  land  in  his  hands  is  chargeable  with  the  bond, 
even  at  law ;  and  now,  since  the  statute  against  fraudulent  devises, 
the  devisee  of  the  equity  of  redemption  is  in  the  same  case,  and 
cannot  redeem  without  payment  of  both,  because  the  statute  makes 
such  devise  void,  as  against  creditors,  and  then  the  devisee  stands 

•  Sir      Francis      North,      Lord  eluded  in  the  mortgage,  and  in  case 

Keeper.  they    should    prove    distinct    debts, 

-  Reg.  Lib.  1683.     A.  fol.  730.     It  then  the  decree  to  be  as  above,  and 

was  referred  to  the  Master  to  enquire  so  made  31st   January  subsequent, 

whether   the   debts   secured   in   this  Reg.  Lib.  1684.    A.  fol.  252. 
case  by  bond  were  separate  or  in- 
444 


HEAMS   V.    BANCE  445 

in  the  same  place  as  the  heir  must  have  done  if  no  devise  had  been 
made;  but  before  that  statute  such  devisee  would  not  be  liable  to 
the  bond  debt  any  more;  than  the  mortgagor  himself. 


HEAMS  V.  BANCE 
High  Court  of  Chancery,  1748 

(3  AtL-.  630) 

Lord  Chancellor,  since  Hilary  term  last,  ordered  this  cause  to 
stand  over,  to  search  the  register's  book  for  the  case  of  Ridout  v. 
Lord  Plymouth,  which  had  been  mentioned  at  that  time  as  an 
authority  in  point,  but,  being  looked  into  it,  did  not  appear  to  be 
at  all  similar  to  the  present,  in  which  the  question  is  whether  a 
mortgagee  who  lent  a  further  sum  afterwards  upon  bond  should 
be  allowed  to  tack  it  to  his  mortgage  in  preference  to  other  creditors 
under  a  trust  for  payment  of  debts  created  by  the  will  of  the  mort- 
gagor? 

Lord  Chancellor  [Hardwicke].  I  have  considered  this  case, 
and  am  inclined  to  think  the  mortgagee  shall  not  be  allowed  to 
tack  the  bond  to  the  mortgage;  with  regard  to  the  heir  of  the 
mortgagor,  the  reason  why  he  shall  not  redeem  the  mortgage  with- 
out paying  the  bond  Hkewise  is  to  prevent  a  circuity,  because  the 
moment  the  estate  descends  upon  him  it  becomes  assets  in  his 
hands  and  liable  to  the  bond;  a  devisee,  too,  of  the  mortgaged 
premises  for  his  own  benefit  is  subject  to  the  same  rule  since  the 
statute  of  fraudulent  devises  made  in  favor  of  bond  creditoi-s. 

But  this  is  a  devise  in  trust  for  the  payment  of  debts,  and  the 
descent  is,  consequently,  broke;  so  that,  as  I  am  at  present  advised, 
I  am  of  opinion  the  mortgagee  can  have  no  priority  with  regard 
to  his  bond,  but  as  to  that  must  come  in  pro  rata  with  the  rest  of 
the  creditors  under  the  trust;  but  if  the  counsel  for  the  mortgagee 
have  an  inclination  to  be  heard  on  this  point,  it  shall  stand  over. 

The  Attorney  General,  of  counsel  for  him,  said  he  thought  the 
point  was  too  strong  against  the  mortgagee  to  be  maintained,  and 
the  court  thereupon  made  their  decree  accordingly.^ 

»"Lord  Chancellor  [Thurlow]  said  that  purpose,  for  in  natural  justice 
the  only  reason  why  the  mortgagee  the  right  has  no  foundation." — Low- 
can  tack  his  bond  to  his  mortgage  is  thian   v.    Hasel,   3    Bro.    C.    C.    162 
to  prevent  a  circuity  of  suits:  it  is  (1790). 
solely    matter    of    arrangement    for  "  I  have  looked  into  all  the  cases, 


446  EQUITY   RELATIONS 

Lee  v.  Stone,  5  Gill  &  J.  1  (Maryland  Ct.  of  App.  1832).  Dor- 
set, J.  (p.  21).  It  has  been  further  contended  that  the  appellants 
are  to  be  first  paid,  as  well  the  balance  due  them  from  Key  as  that 
which  appears  on  the  auditor's  account — Booth,  as  the  security, 
being  answerable  for  the  defalcations  of  the  guardian;  that,  the 
appellants  being  seized  of  the  legal  estate  in  the  land  sold,  their 
legal  title  could  not  be  taken  from  them  until  they  were  paid,  not 
only  the  remaining  balance  of  the  purchase  money,  [but  all  other 
debts]  upon  whatever  account  due  from  Booth  to  them;  and  this 
pretension  is  rested  upon  the  familiar  principles  of  equity,  "that 
he  who  seeks  equity  must  do  equity;"  "that  a  multiplication  or 
circuity  of  action  should  be  avoided." 

But  these  principles  have  never  been  carried  to  the  extent  that 
would  be  necessary  to  their  affording  relief  to  a  party  in  the  pre- 
dicament of  the  present  appellants.  They  stand  here  in  the  charac- 
ter of  complainants  seeking  to  enforce  their  lien  for  a  balance  of 
the  purchase  money  by  a  sale  of  the  premises  on  which  their  lien 
attaches,  and  require  this  court  not  only  to  enforce  their  lien,  but 
to  tack  to  it  another  debt,  apart  from  such  their  application  is  en- 
titled to  no  priority  over  other  creditors,  and  this  to  the  exclusion  of 
another  creditor  before  the  court,  whose  debt  is  secured  by  a  lien 
on  the  premises.  If  there  be  any  case  to  warrant  this  requisition, 
it  has  not  been  presented  to  our  notice  in  the  argument,  and  has 
certainly  escaped  our  researches  upon  the  subject.  It  is  true  that  if 
a  mortgagor  goes  into  chancery  to  redeem,  upon  the  axioms  of 
equity  above  mentioned  he  will  not  be  permitted  to  do  so  but  upon 
payment,  not  only  of  the  mortgage  debt,  but  of  all  other  debts  due 
from  him  to  the  mortgagee.  In  this  there  is  no  prejudice  to  the 
rights  of  others;  nobody  has  a  right  to  complain;  no  injustice  is 
done  to  anybody. 

But  it  is  also  true  that  if  the  mortgagee  seek  a  foreclosure  in 
chancery,  the  mortgagor  will  be  permitted  to  redeem  upon  pay- 

which  are  very  dissatisfactory.    The  of    action.      Why    not   against    the 

present  practice,  that  a  bond  cannot  mortgagor,  if  the  rule  is  that  where  a 

be  tacked  to  a  mortgage  as  against  man  having  one  security  lends  more 

the  mortgagor,  but  may  against  his  money  to  the  same  person,  that  per- 

heir,   does  not  seem   to   have  been  son  shall  pay  his  whole  debt,  or  shall 

always     the    course.  .  .  .  Now,     at  not  redeem  at  all." — Per  Sir  Richard 

least  by  the  modem  cases,  it  is  laid  Pepper  Arden,  M.  R.,  in  Jones  v. 

down    that    the    mortgagee    cannot  Smith,  2  Ves.  372  (1794). 
tack  a  bond  against  the  mortgagor,  And    see,    Coleman    v.    Winch,    1 

nor  against  creditors,  but  may  against  P.  Wms.  775  (1721) ;  Powis  v.  Corbet, 

the  heir,  merely  to  prevent  circuity  3  Atk.  556  (1747). 


LEE    V.    STONE 


447 


ment  of  the  mortgage  debt  only,  no  matter  to  what  amount,  on 
other  accounts,  he  may  stand  indebted  to  the  mortgagee.  And  it 
is  equally  clear  that  if  a  subsequent  mortgagee  or  judgment  creditor 
file  a  bill  to  redeem,  he  will  be  permitted  to  do  so  upon  the  payment 
of  the  mortgage  debt  alone.  Whilst  these  well  settled  principles  of 
equity  remain  unshaken,  upon  no  system  of  analogy  or  consistency 
can  the  claim  of  the  appellants  be  gratified.  Their  doctrine  is  in 
effect  simply  this,  that  in  all  cases  where  the  sale  of  the  real  estate 
of  a  deceased  debtor  is  decreed,  the  debts  due  to  the  heii's  at  law  to 
whom  such  estate  has  descended,  be  their  nature  what  they  may, 
must  first  be  paid,  even  to  the  exclusion  of  judgment  creditors.  To 
such  a  length  the  doctrine  of  tacking  has  never  yet  been  carried.^ 


1  "There  is  no  doubt  as  to  the 
right  of  the  plaintiff  (mortgagor)  to 
redeem  the  whole  of  the  premises 
mortgaged;  but  as  he  who  will  have 
equity  must  do  equity,  it  must  be 
on  condition  not  only  of  paying  the 
sum  charged  upon  the  land,  but  the 
debt  collaterally  due  to  the  mort- 
gagee."— Per  HosMER,  Ch.  J.,  in 
Scripture  v.  Johnson,  3  Conn.  211 
(1819).  Walling  v.  Aiken,  1  MacM. 
Ch.  1  (1840);  Lake  v.  Shumate,  20 
S.  C.  23  (1883);  Anthony  v.  Anthony, 


23  Ark.  479  (1861),  and  (semhle) 
Rowan  v.  Sharps  Rifle  Mfg.  Co.,  33 
Conn.  28  (1865)T  accord. 

The  cases  generally  are  contra: 
Borrow  v.  Kelly,  1  Dall.  (Penn.)  142 
(1785);  Bridgen  v.  Carhartt,  1  Hopk. 
Ch.  (N.  Y.)  234  (1824);  Presbyterian 
Corporation  v.  Wallace,  3  Rawle 
(Penn.),  109,  155  (1831);  Bacon  v. 
Cottrell,  13  Minn.  194  (1868);  Ma- 
honey  V.  Bostwick,  96  Cal.  53  (1892); 
Brooks  V.  Brooks,  169  Mass.  38 
(1897). 


CHAPTER  II     (Continued) 
Section  V. — Mortgagee's  Account 
(a)     Waste,  Repair  and  Improvements 

HANSOM  V.  DERBY 

High  Court  of  Chancery,  1700 

(2  Vern.  392) 

The  bill  being  to  redeem  a  mortgage,  on  the  hearing  an  account 
was  decreed  and  £240  reported  due;  to  which  report  the  plaintiff 
had  taken  exceptions.  The  cause  thus  standing  in  court,  the 
Lord  Keeper  [Sir  Nathan  Wright],  on  a  motion  and  reading 
affidavits  that  the  defendant  had  burnt  some  of  the  wainscot  and 
committed  waste,  ordered  the  defendant  to  deliver  up  possession 
to  the  plaintiff,  who  was  a  pauper,  giving  security  to  abide  the 
event  of  the  account.^ 

RUSSELL  V.  SMITHIES 
Court  of  Exchequer,  1792 

(1  Anstr.  96) 

On  a  bill  of  foreclosure,  it  was  referred  to  the  Deputy  Remem- 
brancer to  take  account  what  the  mortgagee  had  received  from  the 
rents,  &c.,  or  might  have  received,  without  wilful  neglect  in  her. 
It  appeared  that  the  premises  (malt  house,  etc.)  had  been  allowed 
to  fall  so  much  out  of  repair  that  the  rent  fell  from  £22  to  £18. 
Plaintiff  had  done  some  repairs  and  had  held  40  years. 

1  "So,  where  a  mortgagee  in  fee  in  on  a  bill  brought  by  the  mortgagor 

possession  commits  waste  by  cutting  to  stay  waste  and  a  certificate  thereof, 

down  timber,  and  the  money  arising  will  grant  an  injunction." — Per  Lord 

by  the  sale  of  the  timber  is  not  ap-  Ch.  Hardw  cke,  in  Farrant  v.  Lovel, 

plied    in    sinking    the    interest    and  3  Atk.  723  (1750). 
principal  of  his  mortgage,  the  court, 
448 


DEXTER    V.    ARNOLD  449 

Graham  &  Stanley  argued  that  the  mortgagee  in  possession,  be- 
ing only  a  trustee  till  foreclosure,  is  bound  to  keep  the  premises 
in  the  same  repair  as  if  he  was  owner;  2  Vern.  392;  3  Atk.  518; 
and  that  the  diminution  in  value  should  have  been  charged  on  the 
plaintiff,  as  she  might  have  received  the  difference  if  she  had  re- 
paired. 

By  the  Court:  The  mortgagee  has  done  some  repairs;  and,  as 
the  only  proof  of  these  repairs  being  insufficient  is  the  dinimution 
in  value,  we  must  confirm  the  report;  for  it  cannot  be  supposed 
that,  after  40  years  possession,  the  mortgagee  is  bound  to  leave  the 
premises  in  as  good  condition  as  he  found  them.^ 


Dexter  v.  Arnold,  2  Sumner,  108.  (Circuit  Court  of  the 
United  States,  1834.)    Bill  in  equity  to  redeem  a  mortgaged  estate. 

Story,  J.,  delivered  the  opinion  of  the  court: — 

The  fourth  exception  is  on  account  of  the  Master's  having  made 
a  deduction  of  the  supposed  rent,  upon  the  ground  that  the  prem- 
ises were  out  of  repair  and  partly  untenantable  while  in  possession 
of  the  mortgagee  and  his  representatives.  The  argument  seems  to 
proceed  upon  the  ground  that  the  mortgagee  was  bound  to  keep  the 
premises  in  good  repair,  and  therefore  ought  to  be  accountable  for 
such  rents  as  he  might  have  obtained  if  he  had  done  his  duty  in 
regard  to  repairs.  We  know  of  no  univereal  duty  of  a  mortgagee 
to  make  all  sorts  of  repairs  upon  the  mortgaged  premises  while  in 
his  possession.  He  is  bound  to  make  reasonable  and  necessary 
repairs.  But  what  are  reasonable  and  necessary  repairs  must  de- 
pend upon  the  particular  circumstances  of  the  case.  If  a  house 
is  very  old  and  dilapidated,  he  is  not  bound  to  go  to  extraordinary 
expenses  to  put  it  into  full  repair,  if  those  expenses  will  be  greatly 

'  In  Wragg  v.  Denham,  2  Y.  &  Coll.  responsible    for    that    deterioration 

117  (1836),  Alderson,  B.,  said:  "I  during   the   time  of   his   possession, 

think,  also,  that  a  mortgagee  ought  It  is  not  necessary  to  go  the  length 

not  to  be  charged  exactly  with  the  of  shewing  fraud  in  the  mortgagee; 

same  degree  of  care  as  a  man  is  sup-  gross  negligence  is  sufficient." 

posed  to  take  who  keeps  possession  As  to  improvements  and  repairs  to 

of  his  own  property.     But  if  there  the  mortgaged  property  made  by  a 

be  gross  negligence,    by    which   the  mortgagee    in    possession,    see     also 

property    is    deteriorated    in    value,  Sandon    v.    Hooper,    6    Beav.    246 

the  mortgagee  who  is  in  possession  is  (1843) ;  Shepard  v.  Jones,  21  Ch.  D. 

trustee   for   the   mortgagor   to    that  469(1882). 
extent    that  he  ought  to  be  made 


450  EQUITY   RELATIONS 

disproportionate  to  the  value  of  the  estate,  or  to  his  own  interest 
therein.  Certainly  it  cannot  be  pretended  that  he  is  bound  to  make 
new  advances  on  the  estate.  In  Godfrey  v.  Watson,  3  Atk.  518, 
Lord  Hardwicke  said  that  a  mortgagee  in  possession  is  not  obliged 
to  lay  out  money  further  than  to  keep  the  estate  in  necessary  re- 
pair. In  Russell  v.  Smith,  1  Anst.  R.  96,  it  was  decided  that  a 
mortgagee,  after  long  possession,  was  not  bound  to  leave  the  prem- 
ises in  as  good  a  condition  as  he  found  them.  The  fact,  also,  that 
there  has  been  a  diminution  of  the  value  of  the  rents  was  there 
declared  not  to  be  sufficient  proof  of  a  want  of  proper  repairs.  It 
is  quite  a  different  question  whether,  if  the  mortgagee  lays  out 
monej'"  in  proper  permanent  repairs  for  the  benefit  of  the  estate, 
he  may  not  be  allowed  to  claim  an  allowance  therefor.  That  is  a 
point  dependent  upon  other  considerations.  But  where  a  mort- 
gagee is  guilty  of  wilful  default  or  gross  neglect  as  to  repairs,  he  is 
properly  responsible  for  the  loss  and  damages  occasioned  thereby. 
That  was  the  doctrine  asserted  in  Hughes  v.  Williams,  12  Ves.  495. 
And  there  is  the  stronger  reason  for  this  doctrine,  because  it  is 
also  the  default  of  the  mortgagor  himself,  if  he  does  not  take  care 
to  have  suitable  repairs  made  to  preserve  his  own  property.  In 
the  present  case,  however,  the  point  does  not  arise,  for  there  is  no 
evidence  in  the  Master's  report  which  establishes  any  fact  of  wilful 
default  or  gross  negligence  in  the  mortgagee. 

These  remarks  dispose  also  of  the  fifth  exception,  which  is 
founded  upon  the  supposed  dilapidations  of  the  buildings,  while  in 
possession  of  the  mortgagee.  There  is  no  proof  whatever  that  these 
were  caused  by  his  wilful  default  or  gross  negligence;  but  they  were 
the  silent  effects  of  waste  and  decay  from  time. 


MOORE  V.   CABLE 

Court  of  Chancery  of  New  York,  1815 

(1  Johns.  Ch.  385) 

Bill  for  the  redemption  of  a  mortgage.  On  the  26th  of  February,. 
1789,  William  Brown  being  seised  of  the  premises,  lot  No.  54  in 
Smith  &  Graves's  patent,  conveyed  the  same  to  Joseph  Roe,  who, 
for  securing  the  purchase  money,  reconveyed  them  to  Brown  by 
mortgage  dated  the  27th  of  February,  1789,  and  conditioned  for 
the  pajmient  of  £40,  with  interest,  on  the  1st  of  May,  1790.  On  the 
28th  of  October,  1794,  the  mortgage  was  assigned  to  the  defendant 


MOORE   V.    CABLE  451 

for  the  consideration  of  £30  by  the  brother  of  Brown,  as  his  attor- 
ney. The  heirs  of  Roe,  on  the  1st  of  August,  1807,  sold  and  con- 
veyed the  premises  to  the  plaintiff  with  covenants  and  warranty. 

It  appeared  that  the  defendant  entered  into  actual  possession  of 
the  premises,  by  his  tenants,  in  1800,  but  had,  previous  to  that  time, 
exercised  acts  of  ownership.  He  continuerl  in  possession  until 
1808,  when  he,  in  conjunction  with  one  Corbin,  took  a  lease  from 
the  heirs  of  Roe.  Corbin,  being  in  as  tenant  of  the  defendant,  con- 
sented to  let  in  the  plaintiff  with  him;  and  the  defendant  brought 
an  action  of  ejectment  and  recovered  judgment  in  1813,  and  has 
since  continued  in  possession  and  made  improvements  by  clearing 
part  of  the  land,  and  has  received  the  rents  and  profits.  The  plain- 
tiff did  not  know  until  the  trial  of  the  ejectment  in  1813,  that  the 
defendant  held  under  a  mortgage,  and  had  in  1807  offered  to  pur- 
chase his  interest. 

The  Chancellor  [Kent].  Two  questions  are  presented  in  this 
ease: 

1.  Is  the  plaintiff  entitled  to  redeem?  ^ 

2.  The  next  question  is,  whether  the  defendant,  standing  in  the 
place  of  the  mortgagee,  can  be  allowed  for  what  the  case  states  as 
improvements  in  clearing  part  of  the  land.  Such  an  allowance 
appears  to  me  to  be  unprecedented  in  the  books,  and  it  cannot  be 
admitted  consistently  with  estabhshed  principles.  The  defendant 
was,  in  this  case,  a  volunteer.  Instead  of  calling  upon  the  debtor, 
or  foreclosing  the  mortgage,  he  elected  to  enter  upon  uncultivated 
lands,  and  to  exercise  acts  of  ownership  by  clearing  a  part.  To 
make  the  allowance  would  be  compelling  the  owner  to  have  his 
lands  cleared,  and  to  pay  for  clearing  them,  whether  he  consented 
to  it  or  not.  The  precedent  would  be  liable  to  abuse,  and  would 
be  increasing  difficulties  in  the  way  of  the  right  of  redemption. 
Many  a  debtor  may  be  able  to  redeem  by  refunding  the  debt  and 
interest,  but  might  not  be  able  to  redeem  under  the  charge  of  pay- 
ing for  the  beneficial  improvements  which  the  mortgagee  had  been 
able  and  willing  to  make.  The  English  courts  have  always  looked 
with  jealousy  at  the  demands  of  the  mortgagee,  beyond  the  pa}-- 
ment  of  his  debt.  In  French  v.  Baron,  2  Atk.  120,  the  Chancellor 
would  not  allow  the  mortgagee  anjrthing  more  than  his  princij)al 
and  interest,  though  there  was  a  private  agreement  between  the 

^  The    opinion    on    this    point    is      such  a  character  nor  so  long  con- 
tomitted,  the  court  holding  that  the      tinued  as  to  operate  as  a  bar. 
possession  of  defendant  was  not  of 


452 


EQUITY   RELATIONS 


mortgagor  and  mortgagee  for  an  allowance  for  the  mortgagee's 
trouble  in  receiving  the  rents  and  profits  of  the  estate.  The  same 
thing  was  repeated  in  the  case  of  Godjreij  v.  Watson,  3  Atk.  517, 
and  Lord  Hardwicke  there  said  that  a  mortgagee  in  possession  was 
not  obliged  to  lay  out  money  any  further  than  to  keep  the  estate 
in  necessary  repair;  but  if  the  mortgagee  had  expended  money  in 
supporting  the  title  of  the  mortgagor  when  it  had  been  impeached, 
he  would  allow  it.  The  same  doctrine  was  maintained  in  the  case 
of  BonitJion  v.  Hockmore,  1  Vern.  316,  in  which  it  was  declared  that 
no  allowance  was  to  be  made  to  a  mortgagee  or  trustee  for  their 
care  and  pains  in  managing  the  estate. 

I  shall,  accordingly,  direct  a  master  to  compute  the  principal  and 
interest  due  on  the  mortgage  down  to  the  1st  of  January  last,  and 
that,  in  taking  the  account,  he  charge  the  defendant  with  the  net 
amount  of  the  rents  and  profits  received,  except  such  as  shall  ap- 
pear to  have  exclusively  arisen  from  his  own  expenditures  in  im- 
provements; and  that  he  allow  for  the  expense  of  necessary  repara- 
tions, if  any,  but  not  for  improvements  in  clearing  part  of  the  land ; 
and  that  he  report  with  all  convenient  speed ;  all  the  other  questions 
are  in  the  meantime  reserved. 

Decree  accordingly} 


1  The  authorities  generally  are 
accord.  Clark  v.  Smith,  Saxt.  (N.  J.) 
123  (1830);  Gillis  v.  Martin,  2  Dev. 
Eq.  (N.  C.)  470  (1833);  McCarron  v. 
Cassidy,  IS  Ark.  34  (185G);  Sanders 
V.  Wilson,  34  Ver.  318  (1861); 
Adkins  v.  Leiois,  .5  Oreg.  292  (1874); 
Cook  V.  Ottaiva  University,  14  Kans. 
548  (1875);  Equitable  Trust  Co.  v. 
Fisher,  106  111.  189  (1883). 

In  Pennsylvania  the  cost  of  per- 
manent improvements  "necessary 
and  beneficial  for  the  proper  use  of 
the  property"  will  be  allowed  in  an 
action  of  "equitable  ejectment" 
brought  by  a  mortgagor  against  a 
mortgagee  in  possession.  Wells  v. 
Van  Dyke,  109  Penn.  St.  330  (1885). 


In  Massachusetts,  by  statute  (Pub. 
Stat.  Ch.  181,  Sec.  23),  "All  sums  ex- 
pended in  reasonable  repairs  and 
improvements"  are  allowed.  Mer- 
riam  v.  Goss,  139  Mass.  77  (1885). 
And  see  Gordon  v.  Lewis,  2  Sumn. 
143,  149  (1835),  where  this  doctrine 
is  recognized  by  Story,  J. 

But  that  the  right  of  the  mortgagee 
to  an  allowance  even  for  necessary 
repairs  is  not  absolute,  see  Bank  of 
Austrnlnsin  v.  United  Co.,  4  App.  Cas. 
391,  408  (1879),  and  Booth  v.  Bnlti- 
mare  Steam  Packet  Co.,  63  Md.  39 
(1884).  In  Barthell  v.  Syverson,  54 
Iowa,  160  (1880),  such  right  seems 
to  be  denied. 


MICKLES   V.    DILLAYE  453 

MICKLES  V.  DILLAYE 

Court  of  Appeals  of  New  York,  1858 

(17  N.  Y.  80) 

Appeal  from  the  Supreme  Court.  The  action  was  for  the  re- 
demption of  certain  premises  in  the  city  of  Syracuse,  mortgaged  to 
Philo  D.  Mickles.  The  trial  was  before  a  referee,  who  found  that 
the  mortgaged  premises  were,  in  1840,  conveyed  to  Philo  D.  Mickles 
by  one  Fitch.  There  was  then  outstanding  a  mortgage  upon  the 
premises,  executed  by  Fitch  to  David  Hall.  Philo  D.  Mickles  con- 
vey etl  to  the  plaintiff,  with  warranty,  March  8th,  1841,  for  the  price 
of  $4000,  to  secure  $2000  of  which  the  plaintiff  executed  a  mort- 
gage, which  in  this  suit  he  sought  to  redeem.  This  mortgage  and 
the  bond  collateral  thereto  were,  in  April,  1841,  assigned  by  Philo 
D.  jNIickles  to  John  Townsend.  Philo  D.  Mickles  purchased  the 
Fitch  mortgage  on  September,  23d,  1843,  and  on  the  6th  of  No- 
vember, 1843,  assigned  it  to  John  Townsend,  without  the  knowl- 
edge or  consent  of  the  plaintiff,  so  far  as  the  evidence  showed. 
Townsend  on  the  23d  of  September,  1846,  sold  the  premises  to 
Charles  A.  Wheaton  for  $1750,  upon  a  foreclosure  of  the  Fitch 
mortgage,  of  which  no  notice  was  served  on  the  plaintiff.  At  the 
time  of  this  sale,  Wheaton  was  the  owner,  by  assignment  from 
Townsend,  of  the  mortgage  for  $2000,  executed  by  the  plaintiff  to 
Philo  D.  Mickles.  Wheaton  took  possession  of  the  premises,  and 
conveyed  the  same,  with  warranty,  December  19,  1846,  to  John  A. 
Robinson,  who  conveyed,  November  19th,  1852,  to  Henry  A.  Dil- 
laye,  also  with  warranty.  The  only  question  in  dispute  in  this  suit 
was  as  to  the  allowance  to  be  made  to  Dillaye  for  improvements 
after  he  took  possession  under  the  deed  from  Robinson;  the  effect 
of  the  purchase  by  Philo  D.  Mickles  of  the  Fitch  mortgage  being 
the  subject  of  litigation  in  another  suit. 

P.  D.  Mickles  was  in  possession  of  the  premises  at  the  time  he 
convoyed  them  to  the  plaintiff,  and  when  he  received  the  mortgage 
now  sought  to  be  redeemed.  From  that  time  until  the  sale  under 
the  attempted  foreclosure  he  continued  to  rent  them  in  his  own 
name  and  to  receive  the  rents,  without  disclosing  the  interest  of  the 
plaintiff.  They  were  assessed  to  him.  Wheaton,  the  purchaser, 
went  into  possession  immediately  after  the  sale,  the  tenants  of 
P.  D.  Mickles  attorning  and  paying  the  rent  to  him.  P.  D.  Mickles, 
who  was  examined  as  a  witness,  testified  that  when  he  heard  of 


454  EQUITY   RELATIONS 

the  sale,  which  he  supposed  was  by  virtue  of  the  mortgage  exe- 
cuted by  the  plaintiff,  he  told  Wheaton  he  was  very  glad  of  it. 
He  understood  that  the  premises  sold  for  enough  to  pay  the  mort- 
gage, and  he  considered  the  matter  settled,  and  that  Wheaton 
had  obtained  a  perfect  title.  The  purchasers  of  the  premises  under 
Wheaton  took  possession  at  the  time  of  their  respective  purchases. 
There  was  a  biick  building  on  the  lot,  which  was  erected  by  P.  D. 
IMickles  in  1842  or  1843.  It  was  about  nineteen  feet  wide,  thirty- 
five  feet  long  and  two  stories  high.  After  Dillaye  purchased,  and 
in  1852,  it  Avas  found  that  the  old  building  was  in  a  dilapidated 
condition,  and  was  ready  to  fall  down.  The  walls  were  badly 
cracked,  particularly  the  one  in  the  rear.  It  could  have  been  re- 
paired at  an  expense  of  about  $250,  by  taking  down  the  rear  and 
one  of  the  side  walls  and  rebuilding  them.  Dillaye  caused  it  to  be 
rebuilt  and  enlarged,  at  an  expense  of  about  $5000,  increasing  its 
length  to  seventy  feet,  preserving  one  of  the  walls  and  the  floors, 
and  making  use  of  the  old  materials  so  far  as  they  would  answer. 
He  covered  it  with  a  tin  roof,  and  put  in  gas  and  water  pipes.  He 
then  rented  it  in  its  improved  condition. 

The  referee  found  the  foregoing  facts  in  substance;  and  stated 
that  the  improvements  made  by  Dillaye  were  permanent  and  val- 
uable and  were  made  by  him  in  the  full  belief  that  he  was  the 
absolute  owner  of  the  premises.  He  added  that  it  appeared  from 
the  evidence  that  while  the  improvements  were  making,  the  plain- 
tiff was  absent  from  the  county  of  Onondaga  and  that  there  was  no 
evidence  that  he  was  aware  of  the  fact  while  the  improvements  were 
progressing.  In  matter  of  law  he  determined  that  the  plaintiff 
was  not  obliged  to  allow  an3^hing  on  account  of  the  rebuilding 
beyond  what  it  would  cost  to  repair  the  old  tenement.  He  pro- 
ceeded to  state  the  account,  charging  the  plaintiff  with  the  mort- 
gage debt  and  interest,  the  repairs  estimated  upon  the  principle 
above  stated,  premiums  of  insurance  and  taxes,  and  the  interest 
on  these  last  items,  and  crediting  him  with  the  rents  received,  but 
without  including  the  increased  rent  on  account  of  the  rebuilding, 
and  making  due  from  the  plaintiff,  to  be  paid  on  the  redemption, 
$1885.99.  The  defendants  excepted.  Judgment  was  rendered, 
allowing  a  redemption  upon  the  payment  of  that  sum  according 
to  the  report,  which  was  affirmed  at  a  general  term  in  the  fifth  dis- 
trict.   The  defendants  appealed. 

Denio,  J.  The  right  of  a  mortgagor  who  has  made  default  in 
the  payment  of  the  mortgage  debt  according  to  his  contract,  and 


MICKLES    V.    DILLAYE  455 

espeoiall.y  where  the  mortgagee  or  his  assigns  has  lawfully  acquired 
the  possession,  is  in  equity,  and  not  a  strict  legal  right.  It  would  be 
impossible  for  the  plaintiff  to  obtain  possession  of  these  premises 
by  any  suit  or  proceeding  known  to  the  law,  except  a  suit  in  equity. 
When  the  mortgagor  comes  into  a  court  of  equity  in  such  cases 
to  redeem,  he  must  do  equity  to  the  mortgagee,  or  the  court  will 
consider  the  estate  absolute  in  the  latter;  and  the  redemption,  when 
allowed,  will  be  decreed  either  absolutely  or  under  certain  condi- 
tions according  to  the  nature  and  justice  of  the  case.  (Powell  on 
Mortgages,  387,  388.)  In  conformity  with  this  idea  of  the  nature  of 
the  equity  of  redemption,  the  Court  of  Chancery  has  always  obliged 
the  mortgagor  to  submit  to  equitable  conditions.  It  was  formerly 
held,  for  example,  that  if  the  mortgagor,  after  giving  the  mortgage, 
had  borrowed  a  further  sum  of  the  mortgagee,  the  latter  was  not 
obliged  to  submit  to  a  redemption  until  both  debts  should  be  paid 
(id.,  391,  392.)  The  tendency  of  modern  decisions  has  been  to 
limit  and  define  the  power  of  the  mortgagee  to  insist  upon  con- 
ditions to  the  redemption.  It  is  by  no  means  intended  to  state 
there  is  any  unlimited  discretion  in  courts  of  equity  to  compel  the 
owner  of  an  estate  bound  by  a  forfeited  mortgage  to  do  whatever 
may  in  a  popular  sense  and  without  regard  to  legal  precedents  be 
considered  equitable  in  the  particular  case.  It  is,  however,  useful 
to  bear  in  mind  the  origin  and  true  character  of  the  right  of  redemp- 
tion, when  called  upon  to  determine  a  case  not  falling  within  any 
settled  course  of  adjudication.  It  is  still  the  rule  that  the  mort- 
gagor seeking  to  redeem  must  do  equity  to  the  mortgagee,  or  those 
who  have  succeeded  to  his  rights;  and  where  it  has  not  been  settled 
what  is  equity  under  the  circumstances  which  attend  a  given  case, 
the  court  must  determine  it  according  to  its  own  sense  of  what  is 
morally  just  and  right. 

Where  the  conventional  relation  of  mortgagor  and  mortgagee 
is  shown  and  acknowledged  between  the  parties,  there  is  no  reason 
why  the  latter  should  be  allowed  to  obstruct  the  right  of  redemp- 
tion by  expending  money  upon  improvements.  He  can  at  any 
time  call  upon  the  debtor,  by  suit  of  foreclosure,  to  elect  whether  he 
will  pay  the  debt  or  incur  an  absolute  forfeiture;  and  if  he  is  found 
making  costly  improvements  there  is  good  reason  to  suspect  a  de- 
sign to  avail  himself  of  the  present  inability  of  the  debtor  to  dis- 
charge the  incumbrance  in  order  to  confirm  his  title  to  the  estate 
by  embarrassing  the  right  of  redemption.  The  general  rule  is 
therefore  understood  to  be  that  upon  taking  the  account  in  a  suit 
for  redemption  against  a  mortgagee  in  possession,  he  is  to  be 


456  EQUITY   RELATIONS 

charged  with  the  rents  and  profits,  and  be  allowed  only  for  neces- 
sary reparations.  {Moore  v.  Cable,  1  John.  Ch.  R.  387;  Quin  v. 
Brittam,  1  Hoffman's  Ch.  R.  353;  Story's  Eq.,  §  1016.) 

So  if  the  moi'tgagor,  having  in  fact  only  a  redeemable  estate, 
should,  even  in  good  faith,  deny  the  mortgagee's  equity,  this 
ought  not  to  prejudice  the  latter,  provided  he  had  done  nothing  to 
mislead  the  mortgagor,  and  had  not  um-easonably  slept  upon  his 
rights.  In  order  to  apply  the  cases  in  which  permanent  impro\'e- 
ments  have  been  allowed  to  be  taken  into  the  account,  it  is  neces- 
sary to  have  a  clear  view  of  the  situation  of  these  parties  at  the 
time  the  improvements  were  made.  The  defendant  DUlaye  was 
in  possession  as  owner  under  a  deed  with  warranty  from  a  person  in 
possession  holding  a  similar  evidence  of  title  from  one  who  had  pur- 
chased the  premises  at  a  sale  made  professedly  upon  the  fore- 
closure of  a  mortgage  executed  by  the  true  source  of  title,  and  who 
had  taken  possession  under  that  foreclosure.  It  is  easy  to  see  that 
an  examination,  such  as  a  very  cautious  man  would  have  made, 
would  have  shown  the  invalidity  of  the  foreclosure.  But  the  omis- 
sion to  make  an  examination  was  not  such  gross  negligence  as  to 
charge  the  defendant  with  bad  faith.  He  cannot  claim  that  the 
estate  is  irredeemable  because  he  supposed  it  to  be  so;  but  he  is 
not  deprived  by  his  omJssion  to  examine,  of  the  position  of  a  person 
acting  in  good  faith  without  actual  notice.  The  referee  has  found, 
what  could  not  be  doubted  upon  the  evidence,  that  he  believed  him- 
self to  be  the  absolute  owner  of  the  lot.  But  the  plaintiff  had 
very  materially  aided  him  in  coming  to  this  conclusion,  or  rather, 
he  had  suffered  him  to  fall  into  that  error,  by  an  unjustifiable  breach 
of  his  own  obligation.  His  mortgage  was  executed  in  March,  1841. 
One-fourth  of  the  principal  and  one  year's  interest  were  payable 
in  about  one  year  thereafter,  and  the  whole  debt  was  payable  on 
the  1st  day  of  June,  1845.  He  was  in  default  for  a  portion  of  the 
debt  for  eleven  years,  and  the  whole  amount  of  principal  and  inter- 
est had  been  in  arrears  more  than  seven  years  when  this  suit  was 
commenced.  He  has  not  paid  the  smallest  amount,  and  so  far  as 
appears,  had  never  during  that  period  recognized  his  indebtedness. 
Conceding,  as  we  must  do  upon  this  case,  that  the  sale  by  P.  D. 
Mickles  to  the  plaintiff,  and  the  giving  back  of  the  bond  and  the 
mortgage  sought  to  be  redeemed  was  a  real  and  not  a  colorable 
transaction,  the  plaintiff  was  in  possession,  up  to  the  sale  upon  the 
foreclosure,  by  P.  D.  Mickles  as  his  servant  or  agent  or  as  his  tenant. 
This  possession  was  voluntarily  abandoned  and  given  up  to 
Wheaton  upon  his  purchase  after  foreclosure  sale,  and  the  latter 


MICKLES    V.    DILLAYE  457 

immediately  entered  upon  the  reception  of  the  rents  and  profits  as 
owner,  and  he  and  those  who  succeeded  him  have  continued  to  pos- 
sess the  premises  as  owners,  unchallenged  and  without  actual 
knowledge  of  this  right  of  redemption,  until  shortly  before  the 
commencement  of  this  suit,  a  period  of  eight  years.  When  Dillaye 
erected  the  building,  he  and  those  who  had  preceded  him  in  the 
title  under  the  supposed  foreclosure  had  been  in  possession  as 
owners  about  six  years.  It  is  not  found  by  the  referee  that  the 
plaintiff  was  ignorant  that  his  agent  or  tenant  had  been  put  out  of 
possession  upon  pretence  of  the  old  mortgage,  or  that  Wheaton  and 
his  grantees  were  in  possession,  claiming  as  owners  under  that 
proceeding;  and  considering  that  the  premises  lie  in  one  of  the  most 
considerable  interior  towns,  and  upon  the  great  thoroughfare 
through  the  state,  it  is  no  wise  probable  that  he  was  ignorant.  The 
referee  finds  indeed  that  he  was  not  aware  of  the  improvements 
while  they  were  going  on.  This  is  not  inconsistent  with  a  full 
knowledge  that  his  tenant  had  yielded  up  the  possession  to  a  party 
claiming  the  absolute  title,  and  that  the  occupants  were  in  pos- 
session, believing  themselves  to  be  the  owners.  The  fact  probably 
is  that  both  parties  acted  in  ignorance  of  their  rights.  The  old 
mortgage  is  claimed  to  have  been  extinguished  by  the  operation  of 
a  technical  rule  of  law.  Had  it  remained  on  foot  the  right  to  redeem 
both  mortgages  would  not  have  been  of  much  if  any  value  until 
the  defendant  had  improved  the  premises  by  the  expensive  erec- 
tion which  he  put  upon  them.  If  the  plaintiff  was  not  aware  of 
the  extinguishment  of  the  old  mortgage  he  would  naturally  have 
considered  his  interest  as  nominal;  and  this,  I  am  persuaded,  is 
the  explanation  of  his  long  inaction.  The  case,  when  Dillaj^e 
erected  the  building,  was  this:  he  really  had  the  title  of  a  mort- 
gagee in  possession,  but  he  supposed  he  was  the  absolute  owner. 
The  plaintiff  had  in  fact  an  equity  of  redemption,  but  he  had 
abandoned  the  possession  to  the  defendants,  who  entered  as  owners; 
and  he  had  ceased  to  claim  any  interest  in  the  lot.  He  now  finds 
that  he  has  a  valuable  equity  of  redemption;  and  the  question  is 
whether  he  ought  to  pay  for  the  improvement  as  a  condition  to 
the  redemption.  It  was  necessary  that  Dillaye  should  make  ex- 
penditures to  a  considerable  amount  to  render  the  premises  tenant- 
able  at  all ;  but  he  laid  out  more  than  was  strictly  necessary,  though 
not  more  than  would  have  [been]  judicious  had  he  been,  as  he 
supposed  he  was,  the  owner.  In  Benedict  v.  Gibnan,  4  Paige,  58, 
the  plaintiff  had  purchased  under  a  statute  foreclosure  which  did 
not  cut  off  the  rights  of  judgment  creditoi-s  whose  lien  was  subse- 


158  EQUITY    RELATIONS 

quent  to  the  mortgage,  and  had  taken  possession;  and  he  had 
made  permanent  improvements  in  ignorance  of  the  existence  of 
certain  judgments  in  the  hands  of  the  defendants.  He  filed  a  bill, 
claiming  a  strict  foreclosure  unless  the  defendants  would  pay  up 
the  mortgage  and  the  value  of  the  improvements,  and  this  was 
decreed.  The  chancellor  said  it  would  be  inequitable  and  unjust 
to  give  the  defendants  the  benefit  of  these  improvements  without 
compelling  them  to  pay  an  equivalent  therefor.  The  defendant's 
case  in  the  present  controversy  is  much  stronger  than  the  plain- 
tiff's in  Benedict  v.  Gilman,  inasmuch  as  the  judgment  creditors 
had  done  nothing  to  mislead  the  party  in  possession,  and  the  neg- 
ligence of  the  latter  in  omitting  to  search  for  subsequent  incum- 
brances was  at  least  as  great  as  that  of  Dillaye  in  this  case.  Judge 
Story  has  carried  the  rights  of  a  party  in  possession,  who  has  in 
good  faith  made  improvements,  altogether  beyond  what  would  be 
necessary  to  protect  the  defendant  in  this  case.  He  says  generally 
that  courts  of  equity  have  extended  the  doctrine  to  cases  where 
the  party  making  the  repairs  and  improvements  has  acted  bona  fide 
and  innocently  and  there  has  been  a  substantial  benefit  conferred 
on  the  owner  (Treatise  on  Eq.,  §  1237);  and  he  has  carried  the 
principle  into  practice  in  a  case  decided  by  him  in  the  Circuit 
Court  of  the  United  States.  In  Bright  v.  Boyd,  1  Story,  478,  lands 
had  been  sold  by  an  administrator,  but  the  sale  was  void  because 
he  had  not  given  security  according  to  the  statute.  The  heir  of 
the  intestate  had  sued  for  and  recovered  the  possession  against  the 
plaintiff,  who  derived  his  title  under  the  administrator's  sale.  The 
latter  filed  a  bill  in  equity  in  the  Circuit  Court  of  the  United 
States  to  recover  of  the  heir  the  value  of  certain  improvements 
which  he  had  in  good  faith  made  upon  the  land,  and  which  in- 
-cluded  the  building  of  a  large  dwelling-house.  The  heir  was  an 
infant,  and  resided  in  another  state;  but  Judge  Story,  notwith- 
standing, referred  the  case  to  a  master  to  take  an  account  of  the 
enhanced  value  of  the  premises,  deducting  the  rents  and  profits, 
with  a  pretty  strong  intimation  that  the  plaintiff  was  entitled  to 
recover  them,  though  he  said  he  would  look  into  the  case  again 
upon  the  coming  in  of  the  report.  This  conclusion  could  not  prob- 
ably be  sustained  except  upon  the  principle  that  one  who  fraudu- 
lently stands  by  and  sees  another  expending  money  in  good  faith 
upon  his  land,  shall  not  reclaim  the  land  without  paying  for  the 
improvements.  Chancellor  Walworth,  I  think,  laid  down  the  true 
principle  in  Putnam  v.  Ritchie,  6  Paige,  390.  He  decided  in  a  case 
very  similar  to  that  which  was  before  Judge  Story,  that  where 


MICKLES    V.    DILLAYE  459 

there  was  no  fraud  or  acquiescence  on  the  part  of  the  person  having 
the  legal  title,  he  could  not  be  compelled,  even  in  favor  of  a  party 
in  possession  who  had  made  improvements  bona  fide,  to  allow  for 
such  improvements;  but  he  said  that  such  allowances  were  con- 
stantly made  by  courts  of  equity  where  the  legal  title  was  in  the 
person  who  had  made  the  improvements  in  good  faith,  and  where 
the  equitable  title  was  in  another,  who  was  obhged  to  resort  to 
the  court  for  relief.  This,  as  we  have  seen,  is  precisely  the  case 
now  before  the  court. 

In  Wet7nore  v.  Roberts,  10  How.  Pr.  R.  51,  the  question  we  are 
now  considering  was  examined  in  the  Supreme  Court  by  Mr.  Jus- 
tice Hand,  with  his  accustomed  industry.  It  was  a  suit  for  fore- 
closure by  a  junior  mortgagee,  the  defendant  having  purchased 
the  premises  from  one  who  had  bid  them  in  upon  a  foreclosure  of 
the  elder  mortgage,  in  which  proceeding  the  junior  incumbrancer 
was  not  made  a  party.  It  was  alleged  that  the  defendant  had  made 
improvemenis  in  good  faith,  of  the  value  of  $6000,  and  it  was 
decided  that  the  premises  should  be  sold,  and  that  the  value  of  the 
permanent  improvements  as  well  as  the  amount  due  on  the  elder 
mortgage  should  be  paid  out  of  the  proceeds;  after  which  the  plain- 
tiff was  to  be  paid  the  amount  due  on  his  mortgage.  I  refer  to  the 
authorities  relied  on  by  Judge  Hand,  and  also  to  Talbot  v.  Braddill, 
1  Vern.  184,  and  to  Coote  on  Mortgages,  pp.  392,  561. 

I  am  clearly  of  opinion  that  the  refusal  to  allow  for  the  erection 
of  the  building  was  erroneous.  The  judgment  of  the  Supreme 
Court  should  be  reversed,  as  respects  the  account  stated  by  the 
referee,  and  there  should  be  a  reference  in  that  court  to  take  an 
account  between  the  plaintiff  and  the  defendant  Dillaye,  in  which 
the  latter  should  be  allowed  for  the  enhanced  value  of  the  premises 
on  account  of  the  improvements  made  by  the  defendants.  In 
other  respects,  the  order  should  direct  the  usual  allowances  between 
mortgagor  and  mortgagee  on  a  bill  for  redemption.^ 

CoMSTOCK  and  Pratt,  Js.,  did  not  sit  in  the  case;  all  the  other 
judges  concurring. 

Judgment  modified  and  account  ordered  to  be  re-stated} 

1  Concurring  opinion  of  Harris,  J.,  the  belief  that  they  had  title  under  a 

omitteH.  foreclosure  of  the  mortgage,  he  can- 

-  "When,  as  in  this  case,  a  plaintiff  not  complain  that,  as  a  condition  of 
has  permitted  his  right  to  satisfy  a  regaining  possession,  he  is  compelled 
mortgage  to  remain  dormant  for  to  account  for  and  pay  such  taxes, 
nearly  thirty  years,  during  which  assessments  and  for  such  improve- 
others  have  paid  the  assessments  and  ments,  according  to  the  just  and  en- 
taxes,    and   made   improvements    in  lightened  principles  of  courts  of  eq- 


460  EQUITY    RELATIONS 

(6)  Rents  and  Profits — Annual  Rests 

ANONYMOUS 
High  Court  of  Chancery,  1682 

(1  Vern.  45) 

A  mortgagee  shall  not  account  according  to  the  value  of  the  land, 
viz.  He  shall  not  be  bound  by  any  proof  that  the  land  was  worth 
so  much,  unless  you  can  hkewise  prove  that  he  did  actually  make 
so  much  of  it,  or  might  have  done  so  had  it  not  been  for  his  wilful 
default:  as  if  he  turned  out  a  sufficient  tenant,  that  held  it  at  so 
much  rent,  or  refused  to  accept  a  sufficient  tenp,nt  that  would  have 
given  so  much  for  it. 

HUGHES  V.  WILLIAMS 

High  Court  of  Chancery,  1806 

(12  Ves.  493) 

Exceptions  were  taken  by  the  defendant,  a  mortgagor,  to  the 
Master's  report:  first,  that  the  Master  had  charged  the  plaintiff,  a 
mortgagee  in  possession  personally,  and  by  a  receiver  under  his 
appointment,  with  the  rents  actually  received:  whereas  he  ought 
to  have  been  charged,  according  to  the  circumstances  in  evidence^ 
with  the  improved  rents,  at  which  the  estates  had  been  since  let 
by  the  receiver  appointed  by  the  Court,  and  which  ought  to  have 
been  obtained  by  the  plaintiff,  or  his  receiver,  but  for  their  wilful 

uity." — Per    Grover,    J.,    in    Miner  (1886).      See,     also,     McCumber    v. 

V.    Beekman,    50    N.    Y.    338,    345  Oilman,   15  111.  381   (1854);  Morgan 

(1872).  V.    Walbndge,    56    Vt.    405    (1883). 

The  doctrine  of  the  leading  case  is  But  .see  Miller  v.  Curry,  124  Ind.  48 

everywhere  accepted,    the  improve-  (1889),  in  which  it  is  curiously  limited, 

ment   being   reasonable   and    "judi-  and  compare  Barnett  v.  Nelson,  54 

cious."    Gillis  v.  Martin,  2  Dev.  Eq.  Iowa,  41  (1880). 

(N.    C.)    470    (1833);    McConnel   v.  Valuable  and  lasting  improvements 

Holabush,  11  111.  61  (1849);  McSorley  allowed  out  of  the  rents  and  profits  if 

V.   Larissa,    100   Mass.   270    (1868);  made  with  the  knowledge  of  mort- 

Harper's  Appeal,  64  Penn.   St.   315  gagor   and    without   objection    from 

(1870);   American   Buttonhole  Co.   v.  him.    Montgomery    v.    Chadwick,    7 

Burlington  Loan  Assn.,  68  Iowa,  326  Iowa,  114  (1858). 


HUGHES    V.    WILLIAMS  461 

neglect  or  default.  Another  exception  was,  that  the  Master  had 
allowed  the  plaintiff  the  sum  of  68/.  for  the  expense  of  opening  a 
slate  quarry:  the  defendant  contending  thnt  it  was  an  illegal  and 
improper  act;  and  the  only  benefit  accruing  to  the  estate  thereby 
being  the  sum  of  21.  charged  to  the  plaintiff's  account,  as  the  prod- 
uce of  the  slates.  The  defendant  was  out  of  possession  long  before 
the  plaintiff  entered,  prior  mortgagees  having  been  in  possession, 
whom  he  paid,  to  prevent  foreclosure. 

The  Lord  Chancellor  [Lord  Erskine].  I  do  not  mean  to  say 
that  to  charge  a  mortgagee  in  possession  actual  fraud  is  necessary. 
It  is  sufficient  if  there  is  plain,  obvious  and  gross  negligence,  by  not 
making  use  of  facts  within  his  knowledge,  so  as  to  give  the  mort- 
gagor the  full  benefit  that  the  mortgagee  in  possession  of  the  estate 
of  the  mortgagor  ought  to  give  him.  If,  for  instance,  the  mortgagee 
turns  out  a  sufficient  tenant,  and,  having  notice  that  the  estate  was 
under-let,  takes  a  new  tenant,  another  pei-son  offering  more;  an 
offer,  however,  not  to  be  accepted  rashly.  But  this  case  does  not 
furnish  even  that  ground ;  for  with  the  exception  of  a  proposition  to 
give  71.  a  year  for  one  tenement,  instead  of  51.  a  year,  the  rent  then 
paid,  there  is  no  proof  of  any  proposal  for  an  increase.  A  reason 
also  is  assigned  for  not  accepting  the  proposal  in  that  instance; 
that  the  tenant  was  in  arrear,  and  the  plaintiff  Avas  apprehensive  of 
losing  that  arrear;  and  there  is  more  difficulty  where  the  estate 
consists  of  a  number  of  distinct  tenements. 

Another  circumstance  that  weighs  with  me  is  that  the  mort- 
gagor, if  he  knows  the  estate  is  under-let,  ought  to  give  notice  to 
the  mortgagee,  and  to  afford  his  advice  and  aid  for  the  purpose 
of  making  the  estate  as  productive  as  possible.  If  he  communi- 
cated to  the  mortgagee  plans  of  improvement  in  his  contemplation, 
which  were  disappointed  bj^  the  embarrassment  of  his  affairs,  the 
Court  might  take  a  stricter  view  of  the  mortgagee's  conduct.  In 
this  instance  not  only  such  notice  was  not  given,  but  during  this 
whole  period  of  16  years,  while  the  mortgagor  was  out  of  possession, 
he  never  stated  that  the  estate  was  not  managed  as  it  might  be.^ 
Can  the  mortgagor  He  by,  not  giving  notice  that  a  greater  rent  may 
be  made,  and  come  afterwards,  by  way  of  penal  inquiry,  to  charge 
the  mortgagee  with  the  effect  of  his  own  negligence?  I  agree  to 
the  principle  that  has  been  stated  by  the  Solicitor-General,  that  it 
would  be  dangerous  to  say  the  mortgagee  is  not  answerable  except 
for  fraud,  and  would  contradict  many  decrees.    If  such  gross  neg- 

1  Compare  Moshier  v.  Norton,  100  111.  63,  72  (1881). 


462  EQUITY    RELATIONS 

ligence  can  be  shewn  as  comes  up  to  the  description  of  wilful  de- 
fault, he  ought  to  be  answerable  for  it. 

But  I  determine  this  exception  upon  the  principle  that  a  mort- 
gagee, taking  possession,  is  to  take  the  fair  rents  and  profits,  and  is 
not  bound  to  engage  in  adventures  and  speculations  for  the  benefit 
of  the  mortgagor,  but  is  liable  only  for  wilful  default,  of  which 
in  this  instance  there  is  no  pretence,  this  mortgagor  not  having  even 
communicated  that  he  had  any  contemplation  of  improvement  or 
proposed  tenants.  It  would  be  most  dangerous  to  entangle  mort- 
gagees in  a  minute  inquiry,  whether  some  person  would  have  given 
more,  which  was  never  communicated. 

■  Upon  the  same  principle  on  which  I  determine  the  first  exception 
in  favour  of  the  mortgagee,  I  must  determine  the  other  exception 
against  him.  The  principle  is  the  safety  of  mortgagees.  The  line 
cannot  be  drawn.  How  can  it  be  ascertained  that  the  mortgagor 
will  want  a  slate  quarry?  The  amount  is  in  this  instance  incon- 
siderable, but  the  principle  would  reach  the  case  of  a  mine.  The 
mortgagee,  therefore,  having  engaged  in  this  speculation,  must 
speculate  at  his  own  hazard. 

The  first  exception  was  overruled,  and  the  other  allowed.^ 


SHAEFFER  v.  CHAMBERS 

Court  of  Chancery  of  New  Jersey,  1847  • 

(2  Halst.  548) 

The  Chancellor  [Halsted],  On  reading  the  testimony,  I 
do  not  see  any  good  reason  why  the  report  of  the  Master  should  not 
be  confirmed.  A  mortgagee,  by  taking  possession,  assumes  the 
"duty  of  treating  the  property  as  a  provident  owner  would  treat  it, 
and  of  using  the  same  diligence  to  make  it  productive  that  a  provi- 
dent owner  would  use.  If  it  be  a  farm,  he  is  not  at  liberty  to  let  it  lie 
unfilled  because  the  house  on  it,  or  the  house  and  farm  together, 
were  not  rented.  I  see  no  reason  why  the  farm  should  not  be  hus- 
banded, though  the  buildings  on  it  were  not  rented.     Again,  a 

iSee,    also,    Felch   v.    Felch,  9  Vt.  Gerrish    v.    Black,    104    Mass.    400 

Law  Rep.  217   (1845);  Robertson  v.  (1870);  Mos/iier  v.  iVorton,  83  III.  519 

Campbell,  2  Call.   (Va.)  421   (1800);  (1S7Q);  Moshier  v.  Norton,  100  111  63 

Hogan  v.  Stone,   1  Ala.  496  (1840);  (1881). 


SHAEFFER   V.    CHAMBERS  463 

mortgagee  in  possession  is  not  at  liberty  to  permit  the  property  to 
go  to  waste,  but  is  bound  to  keep  it  in  good  ordinary  repair;  and 
if  it  be  a  farm  he  is  bound  to  good  ordinary  husbandry. 

It  appears  by  the  testimony  that,  for  several  years  of  the  time 
during  which  the  defendant  has  been  in  possession,  the  property 
was  not  rented,  and  the  whole  of  it,  farm  and  all,  was  permitted 
to  lie  uncultivated.  The  Master  reports  that  it  was  not  made 
satisfactorily  to  appear  to  him  that  the  property  was  thus  unoccu- 
pied without  the  default  of  the  defendant.  The  ground  here  taken 
by  the  Master  raises  this  question:  a  farm  of  85  acres,  25  of  it  in 
wood  land,  under  mortgage,  is  taken  possession  of  by  the  mort- 
gagee and  rented.  He  remains  thus  in  possession  a  number  of 
years.  Occasionally  during  this  period  the  premises  are  vacant 
and  the  farm  untilled.  Is  it  sufficient  for  the  mortgagee,  thus  in 
possession,  in  order  to  relieve  himself  from  any  charge  for  rents  and 
profits  for  the  years  during  which  the  premises  were  thus  vacant, 
simply  to  say  that  he  could  not  rent  them;  or  should  he  be  held  to 
show  proper  diligence  to  procure  a  tenant?  Is  the  mortgagor  to 
prove  that  he  might  have  rented  it  but  for  his  wilful  default,  as 
that  he  turned  out  a  sufficient  tenant,  or  refused  to  receive  a  suffi- 
cient tenant,  as  would  seem  to  be  held  in  1  Vern.  45;  or  does  the 
fact  of  the  premises  being  left  vacant  throw  upon  the  mortgagee 
the  burden  of  proving  reasonable  diligence  to  procure  a  tenant,  as 
seems  to  be  held  in  Metcalf  v.  Campion,  1  Moll.  238. 

It  seems  to  me  that  it  will  not  do  for  the  mortgagee,  having  thus 
taken  possession,  to  fold  his  arms  and  use  no  means  to  procure 
a  tenant;  and  I  am  disposed  to  think  he  ought  to  be  held  to  show 
reasonable  diligence  to  procure  a  tenant.  But,  at  all  events,  if  the 
farm  and  buildings  are  not  rented  he  ought  to  cause  the  farm  to  be 
tilled,  and  that  in  a  husbandlike  manner. 

From  the  testimony  I  think  the  defendant  has  been  negligent, 
to  say  the  least,  in  the  manner  in  which  he  has  treated  the  premises. 
No  provident  owner  would  have  treated  them  as  he  has.  They 
have  been  permitted  to  go  greatly  out  of  repair,  and  the  lands  have 
been  so  badly  husbanded  that  for  several  of  the  last  years  the  whole 
premises,  rented  at  first  by  the  mortgagee  for  $100,  have  rented 
for  only  $60,  and  he  has  been  charged  but  that  sum.  The  de- 
fendant, during  several  years,  cut  wood  and  timber  from  the  prem- 
ises and  sold  it.  The  Master,  in  stating  the  account,  made  annual 
rests  when  he  found  that  the  wood  and  timber  and  the  rents  and 
profits  exceeded  the  interest  and  expenses,  and  applied  the  income, 
first,  to  the  interest  and  expense  account,  and  then  to  the  reduction 


464  EQUITY   RELATIONS 

of  the  principal.    This  was  objected  to  on  the  part  of  the  defendant. 
It  seems  to  me  the  Master  was  right. 

I  am  satisfied  with  the  general  result  reached  by  the  Master. 

Exceptions  disallowed.^ 


Morris  v.  Budlong,  78  N.  Y.  543,  555  (Court  of  Appeals,  1879). 
This  action  was  oiiginally  brought  by  Mary  Morris  for  an  account- 
ing between  her  and  defendant  Budlong,  and  for  repayment  of 
moneys  alleged  to  have  been  paid  to  him  in  excess  of  what  he  was 
entitled  to;  and  to  have  two  mortgages,  one  executed  by  plaintiff 
to  one  Ferguson,  and  the  other  by  Ferguson  to  Budlong,  canceled 
and  discharged  of  record.  The  facts  of  the  case  were  substantially 
as  follows: 

Plaintiff  being  greatly  embarrassed  and  her  farm  about  to  be 
sold  in  foreclosure,  defendant  agreed  to  bid  it  in  for  the  benefit  of 
plaintiff,  to  purchase  various  outstanding  claims  against  her  and 
to  hold  the  farm  "to  secure  him  for  such  moneys  as  he  should  pay 
out  in  carrying  into  effect  this  agreement,  and  give  her  one  year 
in  which  to  redeem  by  repaying  him  the  moneys  he  should  pay  out 
in  carrying  into  effect  the  agreement,  and  that  Mrs.  Morris  should 
also  pay  him  all  expenses,  and  for  his  time  and  trouble  in  connec- 
tion therewith."  Budlong  thereafter  purchased  the  claim  above 
referred  to,  took  a  deed  of  the  Morris  farm  from  the  sheriff,  and 
on  the  23d  day  of  March,  1860,  purchased  the  premises  in  question 
on  the  foreclosure  sale,  paying  therefor  in  money  and  by  his  bond 
and  mortgage  $1 1,290.87.  To  raise  the  money  for  these  purposes, 
Budlong  was  obliged  to  go  to  Wisconsin  to  get  in  some  investments 
which  he  had  there,  thus  incuriing  expenses,  and  an  absence  from 
home  of  three  or  four  weeks.  That  he  should  do  so  was  agreed 
upon  at  the  time  the  above  arrangement  was  made.  Immediately 
after  the  mortgage  sale  Budlong  entered  into  possession  of  the 
farm,  cultivated  it,  and  received  the  profits  thereof,  except  such 
portion  as  was  received  by  the  Morris  family,  until  about  March 
31,  1866.  During  the  first  years  that  family  occupied  the  whole 
of  the  farm  house,  and  during  the  remainder  it  was  occupied  by 
them  and  the  family  of  Budlong.    The  time  for  payment  by  Mi-s. 

iFan  Buren  v.  Olmstead,  5  Paige  Wallis,  5  AUen   (Mass.)  78,   (1862); 

(N.  Y.),  9  (1834),  accord.    Compare  Sanders  v.  Wilson,  34  Vt.  318  (1861), 

Dexter  v.  Arnold,  2  Sumn.  108,  129  and  Barnett  v.  Nelson,  54  Iowa,  41 

(1834);    Miller   v.    Lincoln,   6   Gray  (1880). 
(Mass.),  556    (1856);  Richardson   v. 


MORRIS    V.    BUDLONG  465 

Mollis  under  the  above  agreement  expired  and  was  extended  one 
year.  Tiie  money  was  not  paid,  but  no  further  extension  was  given. 
It  was  claimed  in  behalf  of  plaintiff,  that  defendant  held  the  farm 
as  mortgagee  in  possession  and  was  chargeable  not  onh-  with  the 
rents  and  profits  actually  received  by  him,  but  with  the  full  rental 
value  of  the  farm,  which,  it  was  alleged,  had  not  been  worked  to 
its  fullest  capacity. 

Danforth,  J.  An  account  rendered  upon  an  application  to  re- 
deem would  properly  charge  the  estate  with  the  money  advanced 
by  Budlong  and  interest,  with  the  expenses  and  compensation  pro- 
vided for  by  the  agreement,  and  would  credit  the  estate  with  what- 
ever had  been  received  from  it  by  sales  or  rents  and  profits,  as  in- 
cident to  the  right  of  redemption,  and  as  an  equitable  offset  against 
the  amount  due  on  mortgage,  after  deducting  taxes,  repairs  and 
other  necessary  expenses  incurred  on  account  of  the  estate.  (Ruck- 
man  v.  Astor,  9  Paige,  517.)  It  would  include,  therefore,  the  pro- 
ceeds of  timber  sold  and  rents  and  profits  actualh^  received.  That 
the  farm  was  not  worked  to  its  fullest  capacity  furnishes  no  ground, 
under  the  circumstances  of  this  case,  for  an  enlarged  liability.  A 
provident  owner  might  not  do  that,  and  there  is  no  fact  stated  from 
which  the  wilful  default  of  Budlong  in  this  respect  could  be  found. 
Xor  has  it  been.  He  is  in  no  sense  a  wrongdoer.  He  went  into 
possession  under  the  legal  title,  taken  with  the  knowledge  of  Mrs. 
INIorris  and  continued  under  circumstances  which  might  well  have 
induced  a  belief  that  he  was  in  fact  the  owner  of  the  estate,  sub- 
ject onl}^  to  an  agreement  to  sell.  He  was  not  technically  at  any 
time  a  mortgagee  in  possession.  There  was  no  mortgage.  The 
character  is  cast  upon  him  by  the  application  of  equitable  rules  to 
an  oral  agreement  easily  susceptible  of  two  constructions,  of  which 
the  one  chosen  is  in  direct  contradiction  of  the  written  instruments 
which  display  his  title,  and  he  is  therefore  chargeable  only  with 
what  he  has  received  and  not  with  what  he  might  have  received. 
"I  think,"  says  Lord  Cranworth,  in  Parkinson  v.  Hanhury,  2  L.  R. 
Engl,  and  Irish  App.  1,^  "that  it  is  perfectly  clear  law  that  where 
a  person  becomes  possessed  of  a  property,  though  erroneously  sup- 
posing that  he  is  a  pm-chaser,  if  it  afterwards  turns  out  that  he  is 
not  to  be  treated  as  a  purchaser,  but  only  as  a  person  who  has  a  sort 
of  lien  upon  the  property,  that  does  not  make  him  a  mortgagee  in 
possession  within  the  meaning  of  that  rule  which  charges  him  with 
wilful  default."    In  1  Story  Eq.  Jur.,  s.  514rt.  (10th  ed.)  it  is  said: 

IS.  C,  L.  11.  2H.  L.  1  (1867). 


466  EQUITY   RELATIONS 

"Where  the  estate  is  thrown  upon  one  in  the  necessary  enforcement 
of  his  legal  rights,  or  comes  to  his  possession  as  trustee,  he  should 
only  be  required  to  act  in  good  faith  and  to  account  for  what  he  in 
fact  realizes;"  and  so  in  Moore  v.  Cable,  1  J.  Chy.  384,  Chancellor 
Kent  directed  the  defendant  to  be  charged  only  with  rents  and 
profits  received.  In  Harper's  Appeal,  14  P.  F.  Smith,  315,  it  is 
declared  that  "whatever  the  rule  on  accounting  might  be,  where 
the  party  charged  v/as  a  mortgagee  under  an  ordinary  formal  mort- 
gage, it  ought  not  to  be  the  same,  when,  by  the  express  agreement 
of  the  party  seeking  equitable  relief,  he  took  and  held  possession 
as  absolute  owner."  In  the  case  before  us  there  was  not  only  a 
title  taken  by  the  defendant,  b}'-  the  plaintiff's  wish,  but  there  is 
alleged  against  it  only  an  oral  promise  to  convey  at  a  certain  time, 
upon  payment  of  certain  moneys,  and  no  agreement  to  account  in 
the  meantime.  There  is  nothing  to  show  any  want  of  good  faith  on 
the  part  of  the  defendant  in  his  management  of  the  property',  nor 
that  he  did  not  act  prudently  and  according  to  his  best  judgment 
in  the  matter.  The  omission  of  Mrs.  Morris  to  redeem  at  the  end 
of  the  time  limited,  the  year,  or  at  the  end  of  the  second  3'ear, 
her  omission  to  arrange  for  further  time  to  do  so,  the  continued 
occupation  of  the  premises  by  Mr.  Budlong,  apparently  as  owner, 
with  no  demand  for  an  account  of  rents  and  profits — all  bear  upon 
this  question,  and,  with  the  considerations  before  adverted  to,  show 
that  the  referee  erred  in  measuring  the  profits  for  which  Mr.  Bud- 
long  was  liable  by  the  rental  value  of  a  farm  worked  to  its  full 
capacity  rather  than  by  what  he  actually  received.^ 

Van  Vronker  v.  Eastman,  7  Met.  (Mass.)  157,  163  (1843). 
Shaw,  C.  J.  The  account  must  be  i*eformed  by  making  annual 
rests.  1.  State  the  gross  rents  received  by  the  defendant  to  the 
end  of  the  first  year.  2.  State  the  sums  paid  by  him  for  repairs, 
taxes,  and  a  commission  for  collecting  the  rents, ^  and  deduct  the 
same  from  the  gross  rents,  and  the  balance  w^ill  show  the  net  rents 

^  Barnard  v.   Jennison,   27   Mich.  refused   even   where   stipulated  for: 

230  (1873);  Hall  v.  Westcott,  17  R.  I.  Bonithon  v.  Hockmore,   1  Vern.  316 

504  (1891),  accord.  (1685);  French  v.  Baron,  2  Atk.  120 

2  Such  commissions  are  allowed  in  (1740);  Godfrey  v.  Watson,  3  Atk.  517 

Massachusetts:  Gibson  v.  Crehore,  5  (1747);  Clark  v.  Smith,  Saxt.  (N.  J.) 

Pick.    146,    161    (1827);    Gerrish    v.  121,  137  (1830); //arper  v.  ^/t/,  70  111. 

Black,  104  Mass.  400  (1870);  and  in  581  (1878);  Blunt  v.  Syms,  40  Hun 

Connecticut:  Waterman  v.  Curtis,  26  (N.  Y.),  566  (1886).    But  see  Green  v. 

Conn.  241  (1857).    But  this  is  excep-  Lamb,  24  Hun,  87  (1881). 
tional,  commissions  being  generally 


MOSHIER   V.   NORTON  467 

to  the  end  of  the  year.  3.  Compute  the  interest  on  the  note  for 
one  year  and  add  it  to  the  principal,  and  the  aggregate  will  show 
the  amount  due  thereon  at  the  end  of  the  year.  4.  If  the  net  an- 
nual rent  exceeds  the  year's  interest  on  the  note,  deduct  that  rent 
from'  the  amount  due,  and  the  balance  will  show  the  amount  re- 
maining due  at  the  end  of  the  year.  5.  At  the  end  of  the  second 
year  go  through  the  same  process,  taking  the  amount  due  at  the 
beginning  of  the  year  as  the  new  capital  to  compute  the  year's  in- 
terest upon.    So  to  the  time  of  judgment.^ 

MosHiER  V.  Norton,  100  111.  63,  73  (1881).  Mr.  Justice  Shel- 
don. Complainant  takes  exception  to  the  mode  of  stating  the  ac- 
count in  making  annual  rests.  The  Master  reported  that  on  Jan- 
uary 1,  1870,  the  principal  sum  due  from  Norton  to  complainant 
was  $8782.50;  that  the  accrued  interest  thereon  to  that  time  was 
$8240.93;  that  the  net  rents  up  to  that  time  were  $8617.47.  As 
the  amount  of  rents  at  that  time  exceeded  all  interest  due,  said 
amount  of  the  rents  to  that  time  was  deducted  from  the  whole 
amount  of  principal  and  interest  at  that  time,  leaving  a  balance 
due  complainant  of  his  principal  sum,  $8405.96,  on  January  1,  1870, 
Then  to  this  sum  was  added  the  interest  for  one  year,  the  taxes 
paid  in  1870,  and  interest  thereon  to  January  1,  1871,  which  made 
the  sum  of  $9490.48,  from  which  was  deducted  the  rent  of  1870  as 
found,  $1711.50,  leaving  a  balance  due  complainant  of  $7778.98  at 
that  date.  Then  follow  similar  annual  statements  of  balances  on 
the  first  day  of  January  in  each  year,  up  to  and  including  January  1, 

•  "The  two   essential   points   are:  the  amount  on  which  interest  shall 

First,  that  when  there  is  a  surplus  of  be  paid  for  the  following  year;  for 

receipts  in  any  year  above  the  in-  that  would  result  in  the  charging  of 

terest  then  due,  a  rest  shall  be  made,  interest  upon  interest,  which  is  not 

and  the  balance  remaining  after  dis-  allowed;  but  the  interest  continues 

charging  the  interest  shall  be  applied  on    the   former   principal    until    the 

to  reduce  the  principal,  so  that  the  receipts  exceed  the  interest  due." — 

mortgage  shall  not  continue  to  draw  Jones,  Mortgages,  §  1139. 
interest  for  the  face  of  it,  when  in  The     cases     are     numerous     and' 

fact  the  mortgagee  has  in  his  hands  generally     accord.       Connecticut     v. 

money    that   should    be    applied    to  Jackson,    1   Johns.   Ch.    (X.   Y.)    13 

reduce   the    principal,    and    thereby  (ISli);  Reed  v.  Reed,  10  Pick.  {Mass.} 

make  the  interest  less  for  the  follow-  398  (1830);  Green  v.  Westcot,  13  Wis. 

ing   year.      Secondly,    although    the  606  (1861);  Gladding  v.  Warner,  36 

amount    received    in    any    year    be  Vt.  54  (1863);  Mahone  v.  WilliamSy 

insufficient  to  pay  the  interest  ac-  39  Ala.  202  (1863);  Adams  v.  Sayre, 

crued,  the  surplus  of  interest  must  76  Ala.  509  (1884);  Bennett  v.  Cook, 

not  be  added  to  the  principal  to  swell  2  Hun  (N.  Y.),  526  (1874). 


468  EQUITY   RELATIONS 

1880,  the  rents  as  found  for  each  year  exceeding  the  interest  and 
taxes  for  the  year. 

Complainant  concedes  the  mode  adopted  by  the  Master  in  mak- 
ing annual  rests  was  the  proper  one  when  no  arrears  of  interest 
are  due  at  the  time  the  mortgagee  enters  into  possession,  but 
[claims]  that,  where  the  interest  of  the  mortgagee  is  in  arrears,  as 
in  the  present  case,  when  the  mortgagee  takes  possession,  the  court 
will  not  require  annual  rests  to  be  made,  even  although  the  rents 
and  profits  may  exceed  the  annual  interest,  nor  until  the  principal 
of  the  mortgage  debt  is  entirely  paid  off.  There  is  authority  for 
this  position  and  distinction.  It  appears  to  be  supported  by  Judge 
Story  in  his  Eq.  Jur.,  vol.  2,  sec.  1016,  a,  and  the  English  cases 
cited  by  him.  But  there  are  American  decisions  which  lay  down  a 
different  rule,  as  we  regard,  and  agreeing  with  the  one  which  was 
adopted  in  this  case.  Van  Vronker  v.  Eastman,  7  Mete.  157; 
Green  v.  Wescott,  13  Wis.  606;  2  Jones  on  Mort.,  sees.  1139, 
1140.  .  .  . 

No  satisfactory  reason  appears  to  our  minds  why,  when  there  is 
a  surplus  of  receipts  in  any  year  above  all  the  interest  then  due  and 
disbursements,  the  balance  remaining  after  discharging  the  inter- 
est should  not  be  applied  to  reduce  the  principal;  and  this,  irre- 
spective of  the  fact  whether  there  was  or  was  not  interest  in  arrear 
at  the  time  the  mortgagee  took  possession.  We  view  the  mode 
adopted  by  the  Master  in  making  annual  rests  just  and  reason- 
able, and  find  no  error  therein.^ 


(c)  Superior  Liens 

Godfrey  v.  Watson,  3  Atk.  517  (1747).     Lord  Chancellor 
IHardwicke]  said  that  a  mortgagee  in  possession  is  not  obliged 

i"Now,   thinking,  as  I  do,  that,  session]    has    been    driven    by    the 

both  upon  principle  and  authority,  wrongful  acts  of  the  parties  opposed 

the  mere  fact  of  an  arrear  of  interest  to  her,  I  think  that  she  ought  not  to 

being  or  not  being  due  to  the  mort-  be  compelled   to  have  her  account 

gagee    when    the    mortgagee    takes  taken     with     rests."— Per     Knight 

possession,  is  not  decisive  upon  the  Bruce,  V.  C,  in  Horlock  v.  Srnith, 

question    of    rests,    but    that    every  1  Coll.  Ch.  287,  297  (1844). 

circumstance  must  be  regarded,  look-  Compare  Finch  v.  Brown,  3  Beav. 

ing  at  all  the  accompanying  circum-  70  (1840);  Wilson  v.  Cluer,  id.  136 

stances,  looking  at  the  general  right  (1840);  Patch  v.  Wild,  30  Beav.  99 

of  a  mortgagee  not  to  be  paid  piece-  (1861),  and   Bennett  v.  Cook,  2  Hun 

meal,  looking  at  the  position  to  which  (N.  Y.),  526  (1874). 
Mrs.  Priestly  [the  mortgagee  in  pos- 


HARPER   V.    ELY  469 

to  lay  out  money  any  further  than  to  keep  the  estate  in  necessary 
repair;  but  if  a  mortgagee  has  expended  any  sum  of  money  in  sup- 
porting the  right  of  the  mortgagor  to  the  estate,  where  his  title  has 
been  impeached,  the  mortgagee  may  certainly  add  this  to  the 
principal  of  his  debt,  and  it  shall  carry  interest. 


Harper  v.  Ely,  70  111.  581,  584  (1873).  Mr.  Justice  Craig. 
It  is  claimed  bj^  appellants  that  the  court  erred  in  allowing 
the  Thompson  and  McQuestion  debt.  This  debt  was  secured  by  a 
piior  trust  deed  on  the  premises,  and  Ely,  in  order  to  protect  his 
interest  under  the  mortgage,  under  which  he  claimed,  was  com- 
pelled to  discharge  this  lien. 

We  apprehend  there  can  be  no  doubt  but  a  mortgagee  is  entitled 
to  be  repaid  all  sums  he  may  advance  for  the  purpose  of  removing 
a  prior  incumbrance  from  the  mortgaged  property.  The  fact  that 
Ely  paid  off  or  purchased  this  debt,  which  was  a  prior  lien  on  the 
land,  could  work  no  hardship  on  the  complainant.  It  was  a  sub- 
sisting debt,  and  a  lien  upon  the  mortgaged  premises,  and  had  to 
be  paid,  and  whether  complainants  are  required  to  pay  it  to  Ely,  or 
the  original  holder,  cannot,  in  anywise,  prejudice  their  rights. 
But  this  debt  was  also  secured  by  the  Haddock  mortgage,  as  well 
as  a  prior  deed  of  trust,  and  may  be  regarded  as  a  part  and  parcel 
of  the  mortgage  debt  from  which  complainants  are  seeking  to  re- 
deem. In  either  event,  however,  we  regard  the  decision  of  the 
Circuit  Court  on  this  point  correct;  but  it  is  said  ten  per  cent, 
interest  ought  not  to  be  allowed  Ely  on  this  claim,  after  it  came 
into  his  hands.  The  claim  drew  ten  per  cent,  interest  in  the  hands 
of  the  original  holder,  and  when  Ely  bought  or  paid  it,  in  equity 
he  was  subrogated  to  the  rights  of  the  original  holder  of  the  claim; 
and  when  the  original  creditor,  by  the  terms  of  the  contract,  was 
entitled  to  ten  per  cent,  interest,  we  fail  to  see  upon  what  principle 
El}'  would  not  be  entitled  to  the  same.^ 

'  Silver    Lake    Bank    v.    North,    4  Cormick    v.    Knox,    10.5    U.    S.    122 

Johns.  Ch.  370  (1820);  Page  v.  Foster,  (1881),  and  the  authorities  generally 

7  N.  H.  392  (1835);  Arnold  v.  Foot,  accord. 
7   B.    Mon.    (Ky.)   66    (1846);   Mc- 


470  EQUITY   RELATIONS 

SIDENBERG   v.   ELY 

Court  of  Appeals  of  New  York,  1882 

(90  N.  Y.  257) 

Appeal  from  judgment  of  the  General  Term  of  the  Court  of 
Common  Pleas,  in  and  for  the  city  and  county  of  New  York,  en- 
tered upon  an  order  made  May  11,  1880,  which  affirmed  a  judg- 
ment in  favor  of  plaintiff,  entered  on  a  decision  of  the  court  on  trial 
at  Special  Term. 

Miller,  J.  This  action  was  brought  for  the  foreclosure  of  a 
mortgage  made  by  one  William  G.  Ely,  deceased,  in  1825,  to  the 
iEtna  Insurance  Company,  to  secure  the  sum  of  $3000.  It  con- 
tained no  clause  in  reference  to  taxes  and  assessments.  In  1872, 
the  ^tna  Insurance  Company  assigned  the  mortgage,  together 
with  the  bond  accompanying  the  same,  to  the  Excelsior  Life  In- 
surance Company.  This  company  paid,  while  it  held  the  mort- 
gage as  assignee,  certain  taxes,  assessments  and  water  rates  upon 
the  mortgaged  premises,  and  to  redeem  the  same  from  tax  sales, 
which  together  amounted  to  the  sum  of  $1640,  or  thereabouts.  In 
the  year  1875,  the  Excelsior  Life  Insurance  Company  assigned  the 
bond  and  mortgage,  with  the  whole  amount  due  by  reason  of  the 
payment  for  taxes,  etc.,  to  the  plaintiff,  who  purchased  at  the  re- 
quest of  the  mortgagor,  and  under  an  agreement  to  extend  the  pay- 
ment of  the  principal  until  September,  1878,  previous  to  which 
time  this  action  was  commenced.  Subsequent  to  his  purchase,  the 
plaintiff  paid  certain  taxes  and  assessments,  amounting  to  the  sum 
of  $925.  At  the  time  of  the  assignment  to  the  plaintiff,  the  sum 
of  $934.78  was  due  for  interest.  The  defendant  Catharine  Ely  is 
the  widow  and  executrix  of  the  mortgagor,  who  died  leaving  a 
will,  by  which  he  devised  her  the  estate  for  hfe  with  remainder 
over  in  fee  to  the  children  of  his  brother  James,  who  are  defendants 
in  this  action.  Upon  the  trial,  the  court  allowed  for  the  taxes, 
assessments  and  water  rates  paid  by  adding  them  to  the  mortgage, 
which,  with  the  principal  and  interest  found  due  to  the  plaintiff, 
amounted  to  the  sum  of  $7365.70. 

The  most  material  question  upon  this  appeal  arises  in  regard  to 
the  rights  of  the  plaintiff  to  the  amount  of  taxes  and  assessments 
paid  by  him  and  his  assignor,  and  to  collect  the  same  out  of  the 
mortgaged  property.    The  rule  seems  to  be  established  by  abun- 


SIDENBERG    V.    ELY  471 

dant  authority  that  when  the  owner  of  mortgaged  property  refuses 
or  neglects  to  pay  taxes  and  assessments,  or  hens  of  a  Uke  nature, 
which  are  imposed  upon  the  mortgaged  premises,  the  mortgagee 
has  the  right  to  pay  the  same  in  order  to  protect  his  security,  and 
the  amount  so  paid  may  be  added  to  and  become  a  part  of  the  mort- 
gage debt,  which  may  be  enforced  upon  a  foreclosure  of  the  mort- 
gage. 

Willard,  in  his  work  on  Equity  Jurisprudence,  at  page  446,  lays 
down  the  rule  that  taxes  paid  may  be  added  to  the  mortgage  debt, 
and  he  adds, ''  so  money  paid  by  the  mortgagee  to  redeem  the  prem- 
ises from  a  tax  sale  becomes  part  of  the  mortgage  debt  in  equity;" 
he  further  sa3^s  at  page  448,  "with  regard  to  the  amount  to  be  paid 
on  redeeming,  it  may  be  said,  that  as  taxes  are  a  legal  charge  upon 
the  estate,  they  may,  if  necessarily  paid  by  the  mortgagee,  be  added 
to  the  mortgage  debt."  The  same  rule  is  upheld  in  Thomas  on 
Mortgages,  at  pages  86  and  276,  and  in  Jones  on  Mortgages,  at  sec- 
tions 77  and  1134.  In  the  last  authority  it  is  laid  down  that  this  is 
so,  although  there  be  "no  tax  clause  in  the  mortgage." 

Numerous  cases  in  the  repoi'ts  sustain  this  doctrine.  (Eagle 
Fire  Ins.  Co.  v.  Pell,  2  Edw.  Ch.  631;  Burr  v.  Veeder,  3  Wend. 
412;  Brevoort  v.  Randolph,  7  How.  Pr.  398;  Faure  v.  Winans, 
Hopk.  Ch.  283;  Marshall  v.  Dairies,  78  N.  Y.  414;  Robinson  v. 
Ryan,  25  id.  320;  Williams  v.  Townsend,  31  id.  414.)  These  cases 
are  criticised  by  the  counsel  for  the  appellant,  and  it  is  claimed  they 
do  not  sustain  the  doctrine  contended  for.  While  all  of  them  do 
not  entirely  cover,  yet  they  tend  to  the  support  of  the  principle  that 
a  mortgagee,  who  to  save  his  mortgage  and  protect  his  security  is 
under  the  necessity  of  paying  the  taxes  and  assessments  to  prevent 
the  property  from  being  sold,  should  be  allowed  for  the  same  as  a 
part  of  his  mortgage  debt  upon  the  foreclosure  of  his  mortgage. 
Whether  the  doctrine  of  tacking,  as  claimed  by  the  counsel  for  the 
appellants,  has  any  application,  is  not  important  to  consider,  if  the 
principle  we  have  stated  can  be  invoked  to  save  the  mortgagee  from 
the  sacrifice  of  the  property  by  reason  of  unpaid  taxes  or  assess- 
ments. In  accordance  with  the  authorities  already  cited,  it  is  not 
necessary  that  the  premises  should  be  sold  prior  to  the  pajment  of 
the  taxes  or  assessments  before  the  mortgagee  is  authorized  to  pay 
the  same,  and  add  the  amount  paid  by  him  to  his  mortgage.  (See 
Eagle  Fire  Ins.  Co.  v.  Pell,  and  Williams  v.  Townsend,  supra.) 

The  doctrine  that  neither  the  plaintiff  nor  his  assignor  could 
have  any  benefit  from  the  doctrine  of  subrogation,  because  they 
voluntarily  paid  the  taxes  and  were  conspirators,  cannot  be  upheld. 


472  EQUITY    RELATIONS 

There  is  no  finding  in  the  case  that  either  of  them  purchased  the 
mortgage  with  the  intent  of  paying  the  taxes  and  assessments  so  as 
to  reHeve  the  hfe  estate  and  cast  the  burden  upon  the  remainder- 
men; they  were  paid  evidently  in  self-defense,  and  for  the  pui-pose 
of  saving  their  liens  as  mortgagees.  It  cannot,  therefore,  be  said 
that  they  were  volunteers,  or  that  they  acted  in  bad  faith  as  to 
others,  or  to  any  one  who  was  under  a  legal  necessity  to  make  the 
payment,  even  if  it  may  be  urged  that  if  the  taxes  had  remained 
a  lien,  the  hfe-tenant  would  have  been  obliged  to  pay  them  to  pre- 
vent a  sale  of  the  property  by  the  State  or  a  return  thereof,  as  that 
furnishes  no  reason  why  the  plaintiff  had  not  a  perfect  and  com- 
plete right  to  protect  his  security  from  sale  for  the  taxes.  There 
is  no  rule  by  which  the  holders  of  the  mortgage  were  obliged  to 
delay  the  payment  so  as  to  compel  the  remaindermen  to  take  ac- 
tion in  regard  to  the  same  and  relieve  the  property.  They  should 
have  been  vigilant  in  looking  after  their  rights,  and  if  they  had  done 
their  duty  the  taxes  would  not  have  accumulated.  Having  failed 
to  perform  a  plain  duty,  if  they  desired  to  protect  the  property 
against  the  taxes,  after  they  have  permitted  the  mortgagee  to  pay 
the  taxes,  they  are  in  no  position  to  object  that  it  operates  as  a 
hardship  upon  them.  They  would  have  had  an  undoubted  light 
to  make  application  for  the  appointment  of  a  receiver  to  collect 
the  rents  and  apply  them  to  the  payment  of  the  taxes.  {Cairns 
V.  Chabert,  3  Edw.  Ch.  313;  1  Washburn  on  Real  Prop.  97.) 

In  the  case  we  are  considering,  the  taxes  remained  unpaid  from 
the  year  1865  to  the  year  1872,  and  then  again  from  1872  to  1874, 
all  inclusive.  For  eight  years  they  were  allowed  to  accumulate 
in  the  first  instance,  and  afterward  for  three  years,  and  during 
that  period  no  effort  was  made  to  pay  them,  nor  any  attempt  to 
compel  the  owner  of  the  life  estate  to  pay  them,  or  the  appropria- 
tion of  the  rents  for  that  purpose.  Here  was  a  gross  neglect  which 
would  have  resulted  in  the  sale  of  the  property,  and  perhaps  the 
destruction  of  the  estate,  but  for  the  intervention  of  the  owner  of 
the  mortgage. 

Again,  if  the  mortgagee  or  his  assignee  had  the  right  to  pay 
within  the  authorities  to  which  we  have  referred,  to  protect  his 
mortgage  lien,  any  equity  which  might  have  existed  between  the 
life-tenant  and  the  remaindermen  cannot  destroy  or  take  away  that 
right.  The  remainderman's  rights  and  his  interests  are  sul)ject 
to  the  right  of  the  mortgagee,  which  was  a  prior  and  superior  right 
given  by  the  mortgagor.  If  the  mortgagor  had  survived,  and  the 
mortgagee  had  paid  the  taxes,  the  amount  paid  would  clearly  have 


SIDENBERG    V.    ELY  473 

been  a  claim  against  the  mortgagor  and  the  mortgaged  premises. 
The  devisees  of  the  mortgagor  cannot  have  any  greater  or  better 
right  than  the  mortgagor,  and  tliey  stand  in  his  place.  There  was 
no  evidence  of  any  fraud  or  any  conspiracy,  to  impose  upon  the 
remaindermen  an  obligation  which  belonged  to  the  life-tenant  to 
perform.  The  mortgage  was  purchased  by  the  plaintiff  in  good 
faith,  as  found  by  the  trial  court,  which  also  refused  to  find  to 
the  contrary.  The  effect  of  the  payment  was,  although  it  increasotl 
the  amount  of  the  mortgage,  to  cancel  and  discharge  the  lien  of  the 
taxes  for  the  same  amount.  The  estate  of  the  appellants  was 
bound  to  pay  the  taxes,  and  the  payment  by  the  mortgagee,  or  his 
assignee,  did  not  add  or  increase  the  burden  imposed  thereby,  but 
in  fact  it  operated  to  reduce  the  rate  of  interest  on  the  amount  of 
such  taxes.  Equity  could  not  grant  relief  to  the  remaindermen, 
for  the  reason  alone  that  the  lien  had  been  changed  from  a  tax  lien 
to  that  of  a  mortgage  lien,  and  we  are  unable  to  see  why  the  life- 
tenant  could  not  as  well  have  been  charged  with  the  burden  of  the 
taxes  after  payment  by  the  mortgagee,  as  he  could  before  such 
payment,  and  in  this  case  no  reason  existed  why  the  interest  of 
the  life-tenant  in  the  fund  after  payment  of  the  mortgage  by  a  sale 
should  not  have  been  burdened  with  this  charge. 

The  defendants  claim  they  are  entitled  to  pay  up  the  mortgage 
and  to  be  subrogated  as  mortgagees,  leaving  the  plaintiff  to  his 
remedy,  or  if  the  property  be  ordered  to  be  sold,  that  the  value  be 
computed,  and  only  that  value,  less  the  present  value  of  taxes 
and  interest  during  the  life  in  expectancy,  be  applied  to  the  accre- 
tions, and  that  after  applying  the  present  value  of  such  taxes  and 
interest  only,  the  remainder  of  the  principal  sum  be  paid  out  of  the 
sale  of  the  inheritance. 

It  does  not  appear  that  the  defendants  have  applied  to  be  sub- 
rogated as  mortgages,  or  placed  themselves  in  a  position  which 
entitled  them  to  an  assignment  of  the  mortgage;  nor  was  the  ques- 
tion raised  upon  the  trial  as  to  the  application  of  the  interest  and 
taxes.  The  plaintiff  is  entitled  to  the  payment  of  the  mortgage 
out  of  the  real  estate  upon  a  sale  thereof,  and  the  question  as  to  the 
disposition  of  the  surplus,  if  any  there  be,  does  not  arise  upon  this 
appeal.^ 

All  concur,  except  Rapallo  and  Tracy,  J  J.,  absent. 

Judgment  affirmed.- 

1  A    portion    of    the   opinion,    not  -  There  is  no  dissent  from  the  doc- 

relating    to   the   question   under   ex-       trine  of  the  princii)al  case,   the  ap- 
amination,  is  omitted.  parent    aberration    of    the   Supreme 


474  EQUITY    RELATIONS 

(d)  Mortgagee,  how  far  a  Trustee 

MANLOVE  V.  BALE 
High  Court  of  Chancery,  1688 

(2  Vern.  84) 

One  Bmton  having  a  church-lease  for  three  lives  in  1664,  con- 
veyed and  assigned  it  to  the  defendant  Bale's  father,  in  consider- 
ation of  5501.  The  conveyance  was  absolute.  But  Mr.  Bale,  the 
purchaser,  by  writing  under  his  hand  and  seal,  agreed  that  if  Mr. 
Bruton,  the  vendor,  should  at  the  end  of  one  year  then  next  en- 
suing pay  him  six  hundred  pounds,  that  he  would  reconvey;  the 
six  hundred  pounds  was  not  paid,  and  two  of  the  lives  died,  and  the 
lease  was  twice  renewed  by  the  defendant  Bale  and  his  father;  and 
now  it  was  near  twenty  years  after  the  first  conveyance.  Bruton 
being  a  prisoner  in  the  Fleet,  and  indebted  to  the  Warden  for 
chamber-rent,  assigns  to  him  all  his  right,  title,  interest,  equity  and 
power  of  redemption;  and  thereupon  the  plaintiff  Manlove,  the 
Warden  of  the  Fleet,  brought  his  bill  to  redeem  and  to  have  an 
account  of  the  rents  and  profits  of  the  premises. 

The  defendant  insisted  on  his  title,  and  that  the  estate  was 
not  now  redeemable,  nor  ought  he  to  account  for  the  profits. 

But,  notwithstanding,  the  Master  of  the  Rolls  decreed  a  re- 
demption on  payment  of  the  550/.  which  was  the  first  consideration 
money,  as  also  the  fines  paid  upon  the  renewal  of  the  leases,  which 
monies  were  to  be  paid  with  interest,  and  the  account  of  profits  was 
to  commence  but  from  the  death  of  Peter  Bale,  who  was  the  pur- 
chaser, and  father  of  the  defendant,  and  until  that  time  the  profits 
were  to  be  set  against  the  interest  of  the  550/.  consideration 
money.  ^ 

Court  of  Iowa  in  Savage  v.  Scott,  45  100  111.  63,  74  (1881).    As  to  the  posi- 

lowa,     130     (1876),     having     been  tion  of  mortgagee  purchasing  at  tax 

promptly  coTTeeted:  Barthell  V.  Syver-  sale,  see  Dale  v.  McEvers,  2  Cowen 

son,  54  Iowa,  160,  164  (1880).     The  (N.  Y.),  118  (1823);  Stroi^g  v.  Bur- 

same  result  is  reached  in  Kansas  by  dick,  52  Iowa,  630  (1879). 
statute.     Gen.  Stat.  1889,  Ch.  107,  i  "The  mortgagee  here  doth  but 

§  148;  Stanclift  v.  Norton,  11  Kans.  grafj;  upon  his  stock  and  it  shall  be 

218  (1873).     That  a  mortgagee  who  for    the    mortgagor's    benefit."— P^r 

has  redeemed  from  tax  sale  is  to  be  Nottingh.\m,  L.  Ch.,  in  Rushivorth's 

allowed  only  the  amount  of  the  taxes  Case,  2  Freem.  12  (1676). 
and  not  the  amount  paid  by  him  for  "This  additional  term  comes  from 

redemption,  see  Moshier  v.  Norton,  the  same  old  root,  and  is  of  the  same 


AMHURST   V.    BAWLING  475 

AMHURST  V.  BAWLING 

High  Court  of  Chancery,  1700 

(2  Vern.  401) 

The  defendant  having  mortgaged  the  manor  of  Thundersley,  to 
which  an  advowson  was  appendant,  to  the  plaintiff,  who  brought 
the  bill  to  foreclose,  the  chui'ch  became  void;  the  defendant  moved 
the  court  for  an  injunction  to  stay  the  proceedings  in  a  qiiare  im- 
pedit  brought  by  the  plaintiff. 

Per  Cur.  Although  the  defendant  Bawling  hath  no  bill,  yet  be- 
ing ready  and  offering  to  pay  the  principal,  interest  and  costs,  if 
the  plaintiff  will  not  accept  his  money,  interest  shall  cease,  and  an 
injunction  to  stay  proceedings  in  the  quare  impedit,  for  the  mort- 
gagee can  make  no  profit  by  presenting  to  the  church,  nor  can 
account  for  any  value  in  respect  thereof,  to  sink  or  lessen  his  debt, 
and  the  mortgagee  therefore  in  that  case,  until  a  foreclosure,  is 
but  in  the  nature  of  a  trustee  for  the  mortgagor. 

And  the  like  order  was  made  between  Jory  and  Cox,^  where  the 
defendant  had  an  injunction  against  the  plaintiff  to  stay  his  pre- 
senting to  a  church,  that  became  vacant  pending  the  suit.^ 

HOLRIBGE  V.   GILLESPIE 

Court  of  Chancery  of  New  York,  1816 

(2  Johns.  Ch.  30) 

The  plaintiff,  being  possessed  of  a  lease  from  B.  W.  and  others, 
of  a  farm  of  about  309  acres  (parts  of  lots,  8,  9,  and  10,  in  Crosby's 
manor),  dated  in  November,  1806,  for  eleven  years,  subject  to  an 
annual  rent  of  75  dollars,  on  the  26th  of  May,  1808,  assigned  the 

nature,  subject  to  the  same  equity  nick,  1  Ball  &  B.;  29,  46  (1808),  and 

of  redemption,  else  hardships  might  compare  Keech  v.  Sandford,  Sel.  Cas. 

be  brought  upon  mortgagors  by  the  Ch.  61  (1726). 

mortgagee's  getting  such  additional  ^  Finch,   Pre.   Ch.  71.      See,    also, 

terms  more  easily,  as  being  possessed  Croft  v.  Powell,  Com.  Rep.  609. 

of  one  not  expired,  and  by  that  means  .        ^  And  see,  Cholmondeley  v.  Clinton, 

worming  out  and  oppressing  a  poor  2  Jac.  &  W.  1,  177  (1S20);  Kirkwood 

mortgagor." — Per   Ciirinm   in  Rake-  v.   Thompson,  2  DeG.,  J.  &  S.  613 

straw    V.    Brewer,    2    P.    Wms.    311  (1865). 

(1728).     But  see  Nesbitt  v.  Treden- 


476  EQUITY    RELATIONS 

lease  to  the  defendant  Thomas  Gillespie.  The  assignment  was  ab- 
solute; but  the  assignee,  at  the  same  time,  executed  a  defeasance, 
declaring  that  the  assignment  was  made  to  secure  a  debt  of  74 
dollars  and  12  cents,  due  from  the  plaintiff  to  Thomas  Gillespie, 
with  interest.  Part  of  the  land  was  cultivated  and  improved.  In 
April,  1809,  the  defendant  T.  G.  took  possession  of  the  improved 
part  of  the  farm.  On  the  29th  of  August,  1809,  the  plaintiff  and 
defendants  entered  into  an  agreement,  under  seal,  by  which  the 
plaintiff  acknowledged  that  he  had  received  of  the  defendants 
100  dollars,  as  a  compensation  for  one-half  of  his  improvements 
on  the  lot,  and  he  gave  up  one-half  of  the  premises  to  the  defendant 
T.  G.;  and  to  secure  to  T.  G.  75  dollars,  with  interest,  together 
with  what  might  afterwards  become  due  to  the  defendants,  the 
plaintiff  gave  up  the  lease  to  T.  G.  until  the  75  dollars  and  interest, 
and  moneys  to  become  due,  should  be  paid,  and  T.  G.  engaged 
to  give  the  plaintiff  a  good  lease  for  half  the  farm  for  eight  years 
from  the  1st  of  February,  1808,  subject  to  the  rents,  &c. 

The  plaintiff  averred  in  his  bill  that  the  100  dollars  was  to  be 
paid  by  the  defendants  to  the  lessors  for  rent;  that  after  the  first 
agreement  he  delivered  T.  B.  G.  produce  of  the  farm  to  the  amount 
of  300  dollars,  and  performed  work  and  services  to  the  amount  of 
150  dollars;  that  T.  G.  went  into  possession  of  part,  and  the  defend- 
ants had  received  the  profits  for  4  years,  at  the  rate  of  180  dollars 
a  year;  and  that  a  balance  was  due  to  him  from  the  defendants;  that 
the  defendant  T.  G.,  after  the  first  assignment,  applied  to  the 
lessors,  and  surrendered  up  the  lease  to  them,  and  took  a  new  lease 
in  his  own  name  and  assigned  it  over  to  T.  B.  G.  The  bill  prayed 
for  an  injunction  against  an  ejectment  brought  by  the  defendants, 
in  1814,  to  recover  possession  of  part  of  the  premises  occupied  by 
the  plaintiff,  &c. 

The  defendants  admitted  that  no  money  was  paid  to  the  plain- 
tiff, but  that  the  100  dollars  previously  paid  by  them  for  rent  to 
the  landlords,  and  for  28  dollars  and  34  cents  paid  for  a  debt  of  the 
plaintiff,  were  agreed  to  be  the  consideration  of  the  agreement  of 
the  29th  of  August,  1809.  That  the  defendants  had  previously 
paid  the  landlords  the  100  dollars,  but  no  acquittance  or  receipt 
was  given  to  the  plaintiff  for  the  amount.  That  the  defendant 
T.  G.  had  been  in  possession  since  1809,  and  made  improvements, 
which  were  specified;  had  paid  the  rent  and  taxes  for  the  whole 
farm  for  the  last  three  years,  and  that  the  plaintiff  had  paid  only 
one-third  of  the  rent  for  the  year  1809.  That  the  plaintiff  had 
never  paid  the  75  dollars,  or  interest,  and  that  he  owed  the  defend- 


HOLRIDGE    V.    GILLESPIE  477 

ant  T.  G.  about  175  dollars,  &c.;  that  the  defendant  occupied  a 
small  house  and  garden,  and  that  the  ejectment  was  brought  for 
the  house  so  occupied  by  the  defendant  T.  G.,  but  not  for  the 
cleared  land. 

The  Chancellor  [Kent].  The  bill  filed  by  the  plaintiff  is  in  the 
nature  of  a  bill  to  redeem,  and  the  plaintiff  is  entitled  to  redeem 
the  whole  of  the  premises  contained  in  the  lease,  and  to  have  the 
entire  advantage  of  the  new  lease  on  such  redemption.  The  re- 
newed lease  enures  for  the  benefit  of  the  mortgagor.  According 
to  the  cases  of  Manlove  v.  Bale,  and  of  Rakestraw  v.  Brewer  (2  Vern. 
84,  2  P.  Wms.  511),  the  additional  term  comes  from  the  same  old 
root,  and  is  subject  to  the  same  equity  of  redemption,  otherwise 
hardship  and  oppression  might  be  practised  upon  the  mortgagor. 
It  is  analogous,  in  principle,  to  the  case  of  a  trustee  holding  a 
lease  for  the  benefit  of  the  cestui  que  trust.  Courts  of  equity  have 
said,  that  if  he  makes  use  of  the  influence  which  his  situation  en- 
ables him  to  exercise  to  get  a  new  lease,  he  shall  hold  it  for  the  bene- 
fit of  the  cestui  que  trust.  (1  Dow.  269;  1  Ch.  Cas.  191;  1  Bro.  Ch. 
Cas.  198.)  So,  if  a  guardian  takes  a  renewed  lease  for  lives,  the 
trust  follows  the  actual  interest  of  the  infant,  and  goes  to  his  heirs, 
or  executor,  as  the  case  may  be.  (18  Vesej'-,  274.)  Indeed,  it  is  a 
general  principle  pervading  the  cases  that  if  a  mortgagee,  executor, 
trustee,  tenant  for  life,  &c.,  who  have  a  limited  interest,  gets  an 
advantage  by  being  in  possession,  "or  behind  the  back"  of  the 
party  interested  in  the  subject,  or  by  some  contrivance  in  fraud, 
he  shall  not  retain  the  same  for  his  own  benefit,  but  hold  it  in 
trust.  (Lord  Manners,  in  1  Ball  &  Beatty,  46,  47;  2  Ball  &  Beatty, 
290,  298.)  The  doctrine  has  been  uniform  from  the  decision  of 
Lord  Keeper  Bridgman,  above  referred  to,  in  1  Ch.  Cas.  191,  down 
to  the  most  recent  decisions.  Nor  do  I  think  that  the  agreement 
of  August,  1809,  ought  to  form  an  obstacle  to  the  redemption  of  the 
whole.  That  agreement  bears  the  mark  of  undue  influence  grow- 
ing out  of  the  first  assignment;  and  contracts  of  that  kind,  made 
with  the  mortgagor,  to  lessen  or  embai'rass  the  i-ight  of  redemption, 
are  regarded  with  jealousy,  as  they  are  very  apt  to  take  their  rise 
in  unconscientious  advantages  assumed  over  the  necessities  of  the 
mortgagor.  (1  Vern.  8;  2  Vern.  520;  2  Atk.  495;  2  Ball  &  Beatty, 
278.)  The  general  principle  is,  "once  a  mortgage  always  a  mort- 
gage;" and  though,  no  doubt,  the  equity  of  redemption  may  be 
released  upon  fair  terms,  yet  the  fairness  and  value  must  distinctly 
appear.    In  this  case  there  was  no  satisfactory  consideration  for  an 


478  EQUITY   RELATIONS 

abandonment  by  the  plaintiff  of  one-half  of  his  farm.  The  agree- 
ment was  false  on  its  face,  for  the  consideration  was  not  paid.  A 
payment  of  the  annual  rent  to  the  landlord  was  no  compensation 
to  the  plaintiff  for  half  of  his  farm;  and  if  we  can  credit  the  subse- 
quent declarations  of  the  defendants,  they  regarded  the  ivhole 
farm  as  still  subject  to  redemption.  But  without  placing  reliance 
on  sayings  of  this  kind,  the  paper  itself,  accompanied  with  the 
admission  that  the  consideration  was  never  paid  to  the  plaintiff, 
is  enough  to  justify  me  in  not  regarding  that  agreement  as  a  valid 
obstacle  to  the  original  right  of  redemption. 

I  shall,  therefore,  direct  a  reference  to  a  master  to  take  and  state 
an  account  between  the  parties,  in  which  the  plaintiff  is  to  be 
charged  with  the  74  dollars  and  12  cents  mentioned  in  the  original 
defeasance,  with  interest  from  that  time,  and  is,  likewise,  to  be 
charged  with  all  sums  of  money  justly  due  to  the  defendants  for 
goods  sold,  or  advances  by  them,  or  either  of  them,  made  to  and 
for  his  use,  and  on  his  account;  and  that  the  plaintiff  is  to  be  cred- 
ited with  all  payments  made,  or  articles  of  produce  delivered,  or 
work,  labor,  and  services  rendered  to  the  defendants,  or  either  of 
them;  and  that  the  defendants  are  to  be  charged  with  the  net  yearl}^ 
value  of  the  premises  possessed  by  them,  or  either  of  them,  during 
the  time  of  their  possession,  after  deducting  the  rent  and  taxes  ac- 
cruing and  paid  during  that  period;  and  that  the  pleadings  and 
proofs  taken  in  the  cause  be  received  as  evidence  before  the  Master, 
and  that  the  question  of  costs  and  all  other  questions  be  reserved 
until  the  coming  in  of  the  report. 

Decree  accordingly. 


HYNDMAN  v.   HYNDMAN 

Supreme  Court  of  Vermont,  1845 

(19  Vt.  9.) 

Appeal  from  the  Court  of  Chancery. 

In  1832  the  orator,  being  indebted  to  the  defendant  and  WiUiam 
Hyndman,  executed  to  them  an  absolute  deed  of  his  farm  in  Barnet 
and  received  back  a  writing  of  defeasance.  The  orator  received 
farther  advarjces  from  time  to  time,  until  1836,  when  the  parties 
reckoned  together  the  amount  due  and  found  it  to  be  $608.69, 
and  then  agreed  that  the  defendant  and  William  Hyndman  should 
have  the  farm,  free  from  the  orator's  equity  of  redemption,  at  eight 


HYNDMAN    V.    HYNDMAN  479 

hundred  dollars;  and  the  defendant  accordingly  surrendered  to  the 
orator  the  notes  due  from  him  and  executed  to  the  orator  a  note  for 
$191.31,  and  the  orator  surrendered  his  writing  of  defeasance;  but 
it  was  at  the  same  time  verbally  agreed  between  them  that  the  de- 
fendant should  sell  the  farm  and  the  orator  should  have  what  was 
received  therefor,  above  the  sum  of  eight  hundred  dollars,  after  pay- 
ing the  defendant  for  his  time  and  trouble  in  the  business.  The 
orator  continued  to  reside  on  the  premises  until  the  commencement 
of  this  suit;  and  the  defendant,  subsequent  to  1836,  leased  the 
premises  from  year  to  year  to  different  persons  and  received  the 
rent,  until  March  30,  1840,  when  the  parties  executed  an  indenture, 
in  which  it  was  recited  that  the  defendant  and  William  Hyndman 
had  paid  to  the  orator  $869.80,  as  of  the  date  of  March  11,  1840,  in 
consideration  of  which  they  held  a  warrantee  deed  of  the  premises 
in  question;  and  it  was  agreed  that  the  orator  should  have  the  use 
of  the  farm  for  one  year  for  the  rent  of  $78.09  that  if  he  paid  the 
rent  and  the  sum  of  $869.80  before  March  11,  1841,  he  should  have 
a  deed  of  the  farm,  but  that  if  he  did  not  make  payment,  the  de- 
fendant should  sell  the  farm  at  auction  on  the  first  day  of  April, 
1841,  and  should  pay  to  the  orator  what  was  received  for  the  farm, 
above  those  sums,  after  paying  defendant  for  his  time  and  trouble. 
The  defendant  caused  the  farm  to  be  sold  at  auction  in  1841  and 
became  the  purchaser  himself  at  $1001.00,  and  offered  to  pay  to  the 
orator  the  surplus  above  the  sums  specified  in  the  indenture;  but 
the  orator  would  not  receive  it.  Testimony  was  given  tending  to 
prove  that  the  orator  was  poor,  and  that  the  farm  was  worth 
$1100,  or  $1200.  Wilham  Hyndman  conveyed  his  interest  in  the 
premises  to  the  defendant  before  the  commencement  of  this  suit. 

The  orator  prayed  that  an  account  might  be  taken  of  the  amount 
justly  due  to  the  defendant,  and  of  the  rents  and  profits  of  the 
premises  received  by  the  defendant,  and  that  the  orator  might  be 
permitted  to  redeem  the  premises. 

The  Court  of  Chancery,  Redfield,  Ch.,  dismissed  the  bill  with 
costs  from  which  decree  the  orator  appealed. 

Redfield,  J.  The  points  of  law  here  decided  are,  that  when  the 
orator  contracted  to  sell  out  his  equity  of  redemption  to  his  mort- 
gagee, he  is,  in  this  court,  entitled  to  ver}^  favorable  consideration, 
on  account  of  the  unequal  relations  in  which  the  parties  stood  at 
the  time.  The  one  was  the  superior  and  the  other  the  dependent. 
The  one  had  power  and  resources;  the  other  had  neither,  but  was 
sore  pressed  by  necessity.    In  addition  to  this,  the  defendant  was 


480  EQUITY   RELATIONS 

clearly  the  mortgagee  of  the  premises  for  such  a  sum  as  it  was  not 
in  the  power  of  the  orator  readily  to  raise.  The  price  was  little 
more  than  two-thirds  the  value  of  the  premises.  It  was  agreed  that 
the  defendant  should  sell  the  premises,  and  if  they  brought  more 
than  the  price  paid  by  the  defendant,  the  plaintiff  should  have  the 
surplus.  Under  these  circumstances  we  think  the  contract  must, 
in  equity,  still  be  considered  a  mortgage,  with  a  power  of  sale  in 
the  mortgagee.  It  is  well  settled  that  in  all  transactions  between 
the  mortgagor  and  mortgagee  the  conduct  of  the  mortgagee  will  be 
watched  very  narrowly  (4  Kent,  143,  and  note,  and  cases  there 
cited).  This  is  the  language  of  all  the  cases,  and  of  all  the  books, 
in  regard  to  all  purchases  made  by  trustees  of  the  interest  of  the 
cestui  que  trust.  Such  contracts  are  not  positively  disregarded  ia 
a  court  of  equity;  but  they  are  viewed  suspiciously  and  criticised 
with  some  degree  of  severity. 

The  only  other  ground  upon  which  the  defendant  claims  to  hold 
the  estate  free  from  the  plaintiff's  equity  of  redemption  is,  that 
in  pursuance  of  the  power  of  sale,  he  caused  the  estate  to  be  sold 
at  auction  and  became  himself  the  purchaser.  Such  sales  have  al- 
ways in  the  English  chancery,  and  in  this  country,  unless  when  the 
matter  is  controlled  by  statute,  been  held  voidable,  at  the  election 
of  the  mortgagor,  or  cestui  que  trust,  unless  he  delay  for  an  unrea- 
sonable time  to  make  his  election,  in  which  case  he  will  be  held 
to  have  confirmed  the  sale  by  his  acquiescence.^  The  cases  are 
too  numerous  upon  this  point,  and  there  is  too  little  conflict  in  the 
decisions,  to  require  an  elaborate  review  of  the  subject. 

The  State  of  New  York,  by  statute,  allows  the  mortgagee,  in  such 
cases,  to  become  the  purchaser,  if  he  conduct  the  matter  with  per- 
fect fairness.  In  that  State,  therefore,  the  decisions  upon  this  sub- 
ject rest  upon  a  somewhat  different  basis  from  the  English  cases. 
In  the  former  the  sale  is  prima  facie  good,  and  it  is,  therefore,  in- 
cumbent upon  the  cestui  que  trust  to  impeach  its  fairness;  but  in  the 
latter  the  sale  is  always  either  good  or  bad,  at  the  election  of  the 
cestui  que  trust, — as  in  the  case  of  a  contract  of  sale  between  an  in- 
fant and  an  adult.  The  authorities  will  be  found  sufficiently  re- 
ferred to  and  digested  in  Davaue  v.  Fanning,  2  Johns.  Ch.  R.  252, 
and  in  Mr.  Sumner's  note  to  Whichcote  v.  Lawrence,  5  Ves.  740. 
Bergen  v.  Bennett,  1  Caine,  1,  is  somewhat  of  an  elaborate  case 
upon  this  point. 

1  That  an  unreasonable  delay  is  the  effect  of  a  transfer  to  a  bona  fide 
fatal  to  the  right,  see  Learned  v.  purchaser,  see  Burns  v.  Thayer,  115 
Foster,   117  Mass.  365   (1875).     For      Mass.  89  (1874). 


WILLIAMS    V.    TOWNSEND  481 

The  decree  of  the  Chancellor  is,  therefore,  reversed  and  the  cause 
remanded  to  the  Court  of  Chancery  to  be  there  proceeded  with.^ 


WILLIAMS  V.  TOWNSEND 

Court  of  Appeals  of  New  York,  1865 

(31  N.  Y.  411) 

This  was  an  action  to  enjoin  the  sale  of  mortgaged  premises 
under  a  statutory  foreclosure. 

The  plaintiff  executed  to  the  defendant's  assignor  his  bond  and 
a  mortgage  of  premises  situated  in  Buffalo,  dated  the  8th  day  of 
February,  1853,  to  secure  the  payment  of  $2,640,  in  ten  years  from 
the  date  thereof  with  annual  interest,  which  mortgage  contained 
a  further  condition  in  these  words:  ''and  shall  also  pay  all  assess- 
ments, taxes  and  charges  on  the  said  premises  to  be  charged  on  the 
same,  and  in  case  of  default  in  paying  the  same,  the  said  parties 
of  the  second  part  and  their  representatives  may  discharge  such 
assessments,  taxes  and  charges,  and  collect  the  same  with  interest 
from  the  time  of  such  payment  under  this  mortgage,  in  the  manner 
particularly  specified  in  the  condition  of  a  certain  bond  or  obli- 
gation bearing  even  date  herewith,  &c."  The  condition  of  the 
bond,  so  far  as  it  relates  to  the  question  in  this  case,  was  in  these 
words:  "and  shall  also  pay  all  assessments,  taxes  and  charges  on 
the  premises  described  in  the  mortgage  bearing  even  date  herewith 
and  collateral  hereto,  and  in  case  of  any  default  in  paying  the  same, 
the  said"  (obligees)  "may  discharge  said  assessments,  taxes  and 
charges,  and  collect  the  same  with  interest  from  the  time  of  pay- 
ment as  part  of  this  bond,  and  the  said  mortgage."  The  mortgage 
contained  a  power  of  sale,  providing  that  if  default  should  be  made 
in  the  payment  of  all  or  any  part  of  the  said  principal  sum  of  $2,640, 

^  Slee  V.  Manhattan  Co.,   1   Paige  page  271,  swpra,  and  New  York  Code 

(N.  Y.),  48  (1828);  Benham  v.  Rowe,  Civ.   Pro.,   §  2394,  for  the  contrary 

2  Cal.  387  (1852) ;  Mapps  v.  Sharpe,  doctrine.    The  New  York  Code  sec- 

32  111.  13  (1863);  Garland  v.  Watson,  tion   reads  as  follows:    "The  mort- 

74  Ala.  323  (1883),  accord.    Compare  gagee,  or  his  assignee,  or  the  legal 

Montague  V.  Dawe.s,  14:  Wlen  (Mass.),  representative  of  either,  may,  fairly 

369   (1867),  and  Fair  v.  Brown,  40  and  in  good  faith,  purchase  the  mort- 

lowa,  209  (1875).    See  The  Howards  gaged  property,  or  any  part  thereof, 

V.  Dams,  6  Tex.  174  (1851) ;  Trimtn  v.  at  the  sale." 
Marsh,  54  N.  Y.  599  (1874),  s.  c, 


482  EQUITY   RELATIONS 

"or  to  the  assessments,  taxes  and  charges  as  aforesaid,  or  of  the 
interest  thereof,  at  the  time  or  times  when  the  same  ought  to  be 
paid,"  then  and  in  such  case  the  mortgagees  were  empowered  to 
sell  the  premises  at  public  vendue,  &c.  "And  out  of  the  moneys 
arising  from  such  sale  or  sales,  to  keep  and  retain  in  their  hands  the 
said  sum  of  two  thousand  six  hundred  and  forty  dollars,  together 
with  such  assessments,  taxes  and  charges  as  shall  have  been  paid 
by  them,  together  with  all  costs,  charges  and  expenses,  on  account 
of  such  sale  or  sales." 

In  1856  the  city  of  Buffalo  assessed  upon  the  said  mortgaged 
premises  taxes  amounting  to  thirty-three  dollars  and  sixty-six  cents 
for  which  the  premises  were  sold  at  auction  by  the  comptroller  of 
said  city  on  the  27th  day  of  May,  1857,  for  taxes,  interest  and  ex- 
penses, then  amounting  to  $36.75.  The  premises  were  bid  off  by 
one  M.  E.  Viele  for  the  term  of  five  hundred  years,  and  certificates 
pursuant  to  the  provisions  of  the  charter  of  said  city  were  issued 
to  him  by  said  comptroller,  in  his  name.  Viele  was,  in  fact,  the 
agent  of  the  defendant,  who  was  then  the  assignee  of  the  mortgage, 
and  bid  off  the  said  premises  for  her,  taking  the  certificates  in  his 
own  name,  as  he  testified,  "for  convenience  of  transfer." 

On  the  1st  of  August,  1857,  the  defendant,  by  her  attorneys, 
commenced  a  foreclosure  under  the  statute  by  advertisement  in  one 
of  the  Buffalo  papers,  which  advertisement  properly  described  said 
mortgage,  &c.,  and  claimed  to  be  due  thereon  "$2640  and  interest 
thereon  from  February  8,  1857;  and  also  the  sum  of  $36.75,  with 
interest  thereon  from  March  27,  1857."  There  was,  in  fact,  no  part 
of  the  principal  of  said  mortgage  or  of  interest  thereon  then  due 
and  unpaid.  Before  the  day  of  sale  mentioned  in  said  advertise- 
ment the  plaintiff  paid  to  the  comptroller  of  the  city  of  Buffalo  the 
amount  legally  necessary  to  redeem  the  premises  from  such  tax 
sale;  and  defendant  refusing  to  discontinue  the  proceedings  of  fore- 
closure, the  plaintiff  commenced  this  action  to  restrain  her  from 
selling  said  premises. 

The  court  at  Special  Term  held  as  a  question  of  law  "that  the 
purchase  by  the  defendant  at  the  tax  sale,  and  the  taking  and  hold- 
ing by  her  of  the  tax  certificate,  did  not  discharge  the  assessment, 
taxes  or  charges  for  which  said  premises  had  been  sold  at  such 
sale;"  and  that  "the  defendant  was  not  entitled  to  enforce  the  re- 
payment of  the  amount  paid  on  such  purchase  as  a  part  of  the  con- 
dition of  said  mortgage,"  and  ordered  judgment  for  the  plaintiff. 

The  judgment  was  affirmed  by  the  General  Term  of  the  8th 
District. 


WILLIAMS   V.    TOWNSBND  483 

Davis,  J.  By  the  condition  of  the  bond  and  mortgage  the  de- 
fendant undoubtedly  had  a  right,  after  failure  by  the  plaintiff  to 
pay  the  taxes  assessed  on  tlie  mortgage  premises,  to  pay  and  dis- 
charge the  same,  and  thereupon  to  collect  the  amount  so  paid  by 
suit  upon  the  bond  or  by  foreclosure  of  the  mortgage.  And  the 
principal  question  in  this  case  is,  whether  the  purchase  of  the  prem- 
ises at  the  tax  sales  and  the  taking  certificates  of  such  purchase 
under  the  provisions  of  the  charter  of  Buffalo,  were  a  discharge  of 
the  assessments  and  taxes,  within  the  true  construction  of  the  bond 
and  mortgage. 

By  section  20  of  title  5  of  the  charter  of  the  city  of  Buffalo,  as 
revised  by  the  Laws  of  1856,  it  is  provided  that  the  owner  of  any 
real  estate  sold  for  taxes  may  at  any  time  before  a  declaration  of 
sale  is  granted,  as  elsewhere  provided  by  the  charter,  redeem  the 
same  by  paying  to  the  city  treasurer,  for  the  benefit  of  the  holder 
of  such  certificate,  the  amount  paid  by  him  with  the  addition  of 
fifteen  per  cent,  per  annum  on  such  amount. 

The  certificates  are  transferable;  and  it  cannot  always  be  easily 
ascertained  who  the  holder  is.  Hence  the  statute  has  provided  that 
the  redemption  may  be  made  by  payment  to  the  city  treasurer.  In 
all  cases  of  sales  for  taxes  the  owner  of  the  land  is  clothed  by  law 
with  this  right  of  redemption;  and  the  tax,  together  with  the  ex- 
penses of  the  sale,  remain  a  lien  on  the  premises  assessed,  with  an 
addition  thereto  of  fifteen  per  cent.,  until  the  redemption  or  pay- 
ment to  the  treasurer  is  made.  The  effect  of  the  sale  is  therefore 
merely  an  assignment  of  the  lien  of  the  tax  and  the  expenses  then 
incurred,  enchanced  by  the  additional  percentage;  and  this  lien 
continues  till  the  owner  of  the  land  makes  the  redemption,  or  the 
holder  of  the  certificate  takes  title  to  the  property  in  the  prescribed 
form.  It  is  therefore  clear  that  the  tax  or  assessment  is  not  dis- 
charged by  the  sale  and  certificate.  In  this  case  the  purchase  at 
the  tax  sale  was  made  by  M.  E.  Viele,  and  the  certificates  of  the 
comptroller  were  made  to  him,  as  he  says,  "for  convenience  of 
transfer."  He  was  in  fact  the  agent  of  defendant,  but  there  was 
nothing  in  the  manner  of  sale  or  form  of  the  certificate  to  indicate 
that  fact.  The  legal  rights  of  the  parties  are  perhaps  the  same  as 
though  the  certificate  had  been  made  to  the  defendant;  but  it 
would  certainly  be  very  embarrassing  to  titles  of  real  estate  if  the 
owner's  right  of  redemption  were  dependent  upon  some  undis- 
closed relation  of  agency  between  the  apparent  purchaser  and  the 
incumbrancer  of  the  land.  There  would  be  no  safety  for  him  if  he 
were  not  allowed  to  redeem;  because  the  ostensible  purchaser  could 


484  EQUITY   RELATIONS 

transfer  the  certificate  to  a  bona  fide  holder  and  subject  him  to  great 
embarrassment  and  perhaps  to  the  loss  of  his  land.  A  mortgagee 
who  desires  to  pay  off  taxes  or  assessments  and  charge  them  on  the 
mortgaged  premises  has  a  very  plain  course  to  pursue.  At  any 
stage  of  the  proceedings  he  can  step  forward  in  his  character  of 
mortgagee  and  pay  the  assessment  or  redeem  from  a  sale  before  the 
purchaser's  title  has  actually  ripened  by  a  conveyance  under  the 
law.  It  is  no  hardship  to  require  him  to  do  this  in  a  plain  and 
distinct  manner,  so  as  not  to  embarrass  the  title  of  the  mortgagor 
or  owner.  When,  however,  he  purchases  at  a  tax  sale  and  takes 
a  certificate  as  purchaser,  that  is  an  election  on  his  part  to  occupy 
the  relation  of  purchaser,  with  all  the  rights  and  incidents  which 
the  law  attaches  to  it.  He  becomes  then  the  owner  of  an  undis- 
charged lien,  which  the  owner  of  the  land  may  discharge  in  the 
manner  provided  by  law. 

But  it  is  insisted  that  the  purchase  and  taking  of  the  certificate 
by  a  mortgagee,  who  has  the  right  by  the  terms  of  his  mortgage,  or 
under  the  general  statute,  to  pay  off  taxes  and  add  the  amount  so 
paid  to  the  lien  of  his  mortgage,  is  by  operation  of  law,  ipso  facto, 
an  extinguishment  and  discharge  of  the  tax.  To  support  this 
proposition  the  familiar  principle  that  a  person  who  is  placed  in 
a  situation  of  trust  or  confidence  in  reference  to  the  subject  of  the 
sale,  or  has  a  duty  to  perform  which  is  inconsistent  with  the  charac- 
ter of  a  purchaser,  cannot  be  a  purchaser  on  his  own  account. 
(Torrey  v.  The  Bank  of  Orleans,  7  Paige,  649;  Van  Epps  v.  Van 
Epps,  9  Paige,  257;  Burhans  v.  Van  Zandt,  3  Seld.  523.) 

But  this  principle  has  never  been  carried  so  far  as  to  prevent  a 
junior  mortgagee  from  purchasing  the  subject  matter  of  the  mort- 
gage at  a  sale  under  a  prior  lien;  nor  has  it  been  held  that  a  title 
fairly  purchased  at  such  sale  was  held  for  the  benefit  of  the  mort- 
gagor. A  mortgage  is  a  mere  security  for  a  debt;  and  there  is  no 
such  relation  of  trust  or  confidence  between  the  maker  and  holder 
of  a  mortgage  as  prevents  the  latter  from  acquiring  title  to  its 
subject  matter,  either  under  his  own  or  any  other  valid  lien.  The 
defendant  had  no  duty  to  perform  to  the  plaintiff  or  toward  the 
mortgaged  premises  that  precluded  her  from  buying  at  the  tax 
sale.  She  was  under  no  obligation  to  pay  the  taxes.  The  plaintiff 
had  covenanted  that  she  might  do  so  at  her  option,  and  thereby 
acquire  certain  rights;  but  she  had  not  undertaken  to  do  it  nor 
subjected  herself  to  any  burthen  or  obligation  whatever  in  respect 
to  the  assessments  or  taxes.  She  might  pay  them  or  not,  as  she 
chose,  or  she  might  stand  upon  her  general  rights  and  purchase  at 


WILLIAMS   V.    TOWNSEND  485 

the  tax  sale,  as  others  could  do,  for  the  purposes  of  investment  or 
protection.  But  if  this  were  not  so,  all  that  the  principle  sought 
to  be  invoked  would  require  is  that  as  purchaser  she  should  take  a 
redeemable  interest  only  which  never  could  ripen  as  against  the 
mortgagor  into  a  greater  one,  and  not  that  the  lien  she  purchased 
should  be  discharged  or  extinguished,  leaving  her  to  no  remedy 
except  the  possibl}'  inadequate  one  under  the  covenants  of  the  bond 
and  mortgage.  It  is  my  opinion,  therefore,  that  the  purchase  at 
the  tax  sale  did  not  operate  to  discharge  the  assessment  and  deprive 
the  plaintiff  of  his  i-ight  of  redemption  under  the  statute. 

But  it  is  urged  that  the  failure  of  plaintiff  to  pa}-  the  tax  was 
a  breach  of  the  condition  of  the  mortgage,  and  gave  defendant 
a  right  to  foreclose  and  collect  the  whole  amount  secured.  There 
is  no  clause  of  the  mortgage  making  the  whole  sum  due  on  failure 
to  pay  the  interest,  or  on  breach  of  any  condition.  The  clause 
which  authorizes  the  retention  by  the  mortgagee  of  the  whole 
amount  secured  after  a  sale  of  the  premises  does  not  have  the  effect 
claimed  for  it;  nor  do  I  think  it  would  countervail  the  provision 
of  the  statute  which  requires  a  sale  in  parcels,  when  that  is  prac- 
ticable, and  prohibits  a  sale  of  more  than  sufficient  to  pay  the 
amount  actually  due  with  the  expenses  of  sale.  (3  R.  S.,  5th  ed., 
p.  860,  §  6.)  But  no  right  to  foreclose  would  accrue  upon  a  simple 
failure  of  the  mortgagor  to  pay  the  taxes;  to  give  that  right  it  is 
essential  that  the  holder  of  the  mortgage  shall  have  paid  off  and 
discharged  the  assessment  or  tax,  otherwise  no  money  has  become 
due  which  the  mortgagee  is  entitled  to  retain  on  a  sale.  The  lan- 
guage of  the  mortgage  settles  this,  for  it  provides  that  "such  assess- 
ments, taxes  and  charges  as  shall  have  been  paid  by  them"  may  be 
retained. 

Besides,  in  my  judgment,  a  mere  naked  breach  of  such  a  cove- 
nant in  the  condition  of  a  mortgage,  without  the  payment  of  any 
amount,  would  give  no  right  to  commence  a  foreclosure  under  the 
statute:  but  this  it  is  not  necessary  to  determine. 

I  think  the  judgment  should  be  affirmed. 

Judgment  affirmed. 


486  EQUITY    RELATIONS 

TEN  EYCK  V.  CRAIG 

Court  of  Appeals  of  New  York,  1875 

(62  N.  Y.  406) 

Appeal  from  order  of  the  General  Term  of  the  Supreme  Court 
in  the  fourth  judicial  department  reversing  a  judgment  in  favor 
of  plaintiff  entered  upon  a  decision  of  the  court  upon  trial  without 
a  jury.    (Reported  below,  2  Hun.,  452;  5  T.  &  C,  65.) 

This  action  was  brought  to  redeem  certain  real  estate  known  as 
"Congress  Hall,"  in  the  city  of  Rochester,  from  incumbrances  held 
by  the  defendants  as  executors  of  the  estate  of  John  Craig,  de- 
ceased,  and  for  an  accounting  of  the  rents  and  profits. 

The  facts  as  found  by  the  trial  court  are  substantially  as  follows: 

On  the  23d  of  April,  1860,  Nelson  P.  Stewart,  then  being  the 
owner  in  fee  of  the  premises,  executed  a  mortgage  thereon,  and  on 
a  farm  in  Erie  county,  to  the  defendant  John  Craig,  to  indemnify 
him  for  becoming  Stewart's  surety  in  an  undertaking  made  to  stay 
proceedings  on  a  judgment  recovered  in  the  Supreme  Court  on  the 
24th  day  of  October,  1859,  in  favor  of  Maria  L.  Dehon,  executrix, 
against  Stewart,  for  $10,184.83,  on  an  appeal  taken  by  Stewart 
from  said  judgment.  At  the  time  of  the  execution  of  said  mort- 
gage said  Congress  Hall  property  was  subject  to  three  prior  mort- 
gages, amounting  to  about  $19,000,  two  of  which  were  then  owned 
by  the  defendant  Craig,  and  the  third  by  Asa  Sprague,  who  subse- 
quently transferred  it  to  Craig.  The  said  property  was  also  sub- 
ject, at  the  time  of  the  execution  of  said  indemnity  mortgage,  to  a 
lease  executed  by  Stewart  to  Robert  D.  Cook,  for  the  term  of  five 
years  from  the  1st  day  of  May,  1860,  at  a  rent  of  $3600  a  year, 
payable  monthly  in  advance.  On  the  24th  of  April,  1860,  Stewart 
assigned  said  lease  and  the  rents  payable  thereon  to  Craig,  as  fur- 
ther indemnity  for  his  becoming  surety  as  above  stated,  by  an  in- 
strument in  writing.^ 

Craig  was  made  liable  as  surety,  and  was  compelled  to  and  did 
pay  $12,301.24  on  said  undertaking  on  the  7th  of  August,  1862. 
Craig  foreclosed  his  indemnity  mortgage,  so  far  as  it  related  to  the 
property  in  Erie  county,  and  realized  therefrom  the  sum  of 
$2615.88.  At  the  time  when  Craig  signed  said  undertaking,  and 
took  said  indemnity,  said  Congress  Hall  property  was  subject  to  a 

1  The  assignment  is  omitted. 


TEN    EYCK    i'.    CRAIG  487 

judgment  theretofore  recovered  in  the  Supreme  Court  in  favor  of 
the  Madison  County  Bank,  or  the  trustees  thereof,  against  Stewart, 
for  the  sum  of  $2500  and  costs,  of  the  existence  of  which  judgment 
Craig  was  ignorant  at  the  time.  On  being  informed  of  it  he  re- 
fused to  justify  as  a  surety  to  said  undertaking,  unless  he  was 
indemnified  against  said  judgment,  and  therefore  Stewart  executed 
a  bond,  dated  the  1st  day  of  June,  1860,  and  procured  tlie  same 
to  be  executed  by  George  K.  Johnson  and  the  defendant  EHsha  C. 
Litchfiekl,  as  his  sureties,' in  the  penal  sum  of  S5000,  conditioned 
to  protect  said  Congress  Hall  property  against  the  judgment  last 
above  mentioned,  which  bond  was  delivered  to  Craig,  and  he  then 
justified  as  surety  to  the  undertaking  given  on  appeal.  On  the  5th 
day  of  December,  1863,  Craig  recovered  a  judgment  on  said  last 
mentioned  bond  against  Litchfield  for  $5179.69,  which  judgment 
Litchfield  paid  to  Craig.  On  the  17th  of  December,  1860,  the 
Congress  Hall  property  was  sold  on  an  execution  issued  upon  said 
judgment  in  favor  of  the  Madison  County  Bank,  and  was  bid  off  at 
such  sale  by  the  defendant  Craig  for  the  sum  of  five  dollars.  On 
the  17th  of  March,  1862,  Daniel  W.  Powers,  by  virtue  of  a  judg- 
ment recovered  by  him  against  Stewart  on  the  26th  of  January, 
1860,  for  $1481.78,  redeemed  the  Congress  Hall  property  from  said 
sale,  and  on  the  21st  of  March,  1862,  the  sheriff,  in  completion  of 
such  sale,  executed  a  deed  of  said  property  to  Powers.  On  the  7th 
of  May,  1864,  Powers,  by  deed  of  that  date,  conveyed  said  property 
to  the  defendant  Craig,  in  consideration  of  the  sum  of  $1753.53 
paid  by  Craig.  The  judgment  under  which  Powers  redeemed  had 
been  sold  and  assigned  by  him  before  the  redemption,  and  on  the 
10th  of  April,  1860,  to  Oliver  M.  Benedict,  of  Rochester,  in  con- 
sideration of  the  amount  then  due  on  the  judgment,  paid  by  Bene- 
dict to  Powers  at  the  time.  On  the  day  of  the  redemption,  to  wit, 
the  17th  of  March,  1862,  Benedict  reassigned  the  judgment  to 
Powers,  without  any  valuable  or  valid  consideration.  At  the  time 
of  each  of  those  assignments,  and  for  several  yeai-s  next  preceding 
that  time,  Benedict  was  the  attorney  of  Stewart,  and  was  his  con- 
fidential adviser.  He  purchased  said  judgment  and  took  the  assign- 
ment of  it  in  his  own  name,  at  the  request  of  Stewart.  And  the 
money  which  he  paid  for  it  to  Powers  was  furnished  by  Stewart,  or 
was  replaced  by  him  immediately  after  such  payment,  in  pursuance 
of  an  arrangement  between  him  and  Benedict  made  before  the 
money  was  paid  by  Benedict.  There  is  no  evidence  that  the  assign- 
ment of  the  judgment  from  Benedict  to  Powers  was  authorized  by 
tStewart  or  that  he  knew  of  it.     Craig,  when  he  took  the  deed 


488  EQUITY   RELATIONS 

from  Powers,  had  knowledge  of  the  facts  as  to  the  relations  between 
Benedict  and  Stewart,  and  as  to  the  assignment  of  the  judgments. 

On  the  27th  of  April,  1860,  Stewart  and  his  wife  conveyed  "Con- 
gress Hall"  to  Henry  K.  Sanger,  by  deed,  subject  to  the  several 
mortgages  above  stated,  except  the  indemnity  mortgage.  Sanger 
died  previous  to  July,  1864,  leaving  a  will  by  which  he  gave  to  his 
wife  all  his  estate,  real  and  personal,  and  named  her  as  sole  executor. 
She,  as  devisee  and  executrix,  conveyed  Congress  Hall  to  the  plain- 
tiff Henry  Ten  Eyck,  by  deed  dated  3d  of  January,  1867. 

On  these  facts  the  court  decided  as  matter  of  law,  among  other 
things,  that  the  defendant  Craig,  on  entering  upon  the  collection 
of  the  rents  on  the  assignment  of  the  lease  of  the  Congress  Hall 
property,  was  in  the  position  of  a  trustee  for  Stewart,  in  respect  to 
the  leased  property,  and  his  purchase  of  the  same  while  he  occu- 
pied that  position  inured  to  the  benefit  of  the  cestui  que  trust,  at 
his  election.  That  when  Benedict  held  the  judgment  under  which 
Powers  redeemed,  he  held  it  in  trust  for  Stewart.  Powers,  as  the 
assignee  of  Benedict,  without  consideration,  took  Benedict's  right 
in  the  judgment  and  no  more.  When  Powers  redeemed  he  took 
the  land  subject  to  the  trust  which  attached  previously  to  the  judg- 
ment in  his  hands.  That  Craig  was  chargeable  with  notice  of  said 
trust.  That  Stewart,  while  he  owned  the  Congress  Hall  property, 
had  the  right  to  redeem  the  same,  on  paying  to  Craig  the  amount 
of  his  liens  and  advances,  over  and  above  his  receipts.  That  the 
plaintiff  Ten  Eyck,  by  means  of  the  successive  conveyances  above 
stated,  has  succeeded  to  such  right  of  Stewart  to  redeem  said  prop- 
erty, and  is  entitled  to  redeem. 

Andrews,  J.  .  .  .  It  will  be  convenient  in  examining  the 
questions  wliich  arise  in  the  case  to  leave  out  of  view  for  the  present 
the  facts  rehed  upon  as  establishing  a  trust  relation  between  Craig 
and  Stewart,  which  disabled  Craig  from  acquiring  a  title  to  the 
property  hostile  or  adverse  to  Stewart  or  his  grantee,  and  to  con- 
sider the  position  of  Sanger  and  his  relation  to  the  property  after 
the  sale  and  conveyance  by  the  sheriff,  upon  the  assumption  that 
Craig  as  purchaser  on  the  sale  and  the  grantee  of  the  redemption 
title  was  unaffected  by  any  special  disability,  and  acquired  the 
same  rights  through  the  sale  and  the  subsequent  proceedings  as 
•if  at  the  time  of  the  purchase  he  had  been  a  stranger  to  Stewart 
and  Sanger,  owing  them  no  duty  and  bound  by  no  obUgation  to 
protect  the  equity  of  redemption.  It  is  not  claimed  that  there  was 
any  fraud  or  irregularity  in  the  sale  of  the  bank  judgment.    The 


TEN   EYCK    V.    CRAIG  489 

judgment  was  unpaid;  the  sale  was  open  and  fair,  and  so  far  as 
appears  was  not  procured  by  the  intervention  of  Craig.  The  sum 
bid,  so  far  as  appears,  was  at  the  time  the  full  value  of  the  interest 
of  Sanger  in  the  property.  There  is  nothing  which  in  any  manner 
tends  to  impeach  the  bona  fides  of  the  sale.  It  is  claimed,  however, 
that  the  redemption  was  void,  on  the  ground  that  the  judgment 
under  which  it  was  made  had  been  paid  by  Stewart,  the  judgment 
debtor,  before  the  redemption,  and  was  not  at  the  time  a  lien  upon 
the  land.^ 

The  next  and  principal  question  to  be  considered  is,  whether 
.  Craig,  at  the  time  of  the  sale,  occupied  such  a  relation  to  the  prop- 
erty, or  to  Stewart  or  Sanger,  that  he  was  disabled  from  purchasing 
for  his  own  benefit,  and  claiming  the  title  adversely  to  them.  If  he 
occupied  that  relation,  he  cannot  set  up  any  right  acquired  as  pur- 
chaser on  the  sheriff's  sale  in  bar  of  their  right  to  redeem.  Pur- 
chases by  trustees,  or  persons  occupying  fiduciary  positions,  in  con- 
travention of  their  trust  or  duty,  are  held  in  equity  to  be  made  for 
the  benefit  of  the  cestui  que  trust,  at  his  election.  No  irredeemable 
title  can  be  acquired  upon  such  a  purchase.  And  if  the  purchase  by 
Craig  was  within  the  principle  which  prohibits  a  purchase  by  a 
trustee,  it  is  an  immaterial  circumstance  that  the  time  within 
which  a  statutory  redemption  might  have  been  made  has  expired. 
The  right  of  redemption  exists  in  favor  of  the  cestui  que  trust  and 
those  in  privity  with  him,  independently  of  the  statute,  upon  gen- 
eral principles  of  equity,  and  may  be  enforced  at  any  time  within 
the  period  allowed  by  the  statute  of  hmitations,  or  the  rule  of 
courts  of  equity  regulating  the  jurisdiction. 

The  rule  which  prohibits  a  trustee  from  purchasing  the  property 
of  a  cestui  que  trust  stands  upon  the  proposition  stated  by  the  chan- 
cellor in  Whichcote  v.  Lawrence,  3  Ves.  740,  that  one  who  under- 
takes to  act  for  another  in  any  matter  shall  not  in  the  same  matter 
act  for  himself.  It  applies  in  all  cases  where  the  duty  which  the 
trustee  has  to  perform  in  respect  to  the  property  is  inconsistent 
with  his  becoming  a  purchaser  for  his  own  use.  And  the  purchase 
will  not  be  allowed  to  stand,  although  the  court  may  not  be  able 
to  discover  any  wrong  intention  on  the  part  of  the  trustee,  or  that 
he  has  gained  any  advantage  in  the  transaction.  The  rule  is  inflex- 
ible, that  he  shall  not  place  himself  in  a  position  where  his  interest 
is  or  may  be  in  conflict  with  his  duty. 

1  The  discussion   of   this  point  is      demption  remains  in  Stewart  or  his 
omitted.     The  learned  judge  reaches      grantees, 
the  conclusion  that  no  right  of  re- 


490  EQUITY   RELATIONS 

It  is  claimed  that  Craig  was  disabled  from  purchasing  the  Con- 
gress Hall  property  at  the  sheriff's  sale,  and  holding  it  adversely  to 
Stewart  and  Sanger,  under  the  rule  just  adverted  to.  There  are 
two  grounds  upon  which  this  claim  is  based:  First,  that  Craig  at 
the  time  was  mq;-tgagee  in  possession;  and,  second,  that  the  rela- 
tion of  trustee  and  cestui  que  trust,  in  respect  to  the  property,  was 
created  between  Craig  and  Stewart  by  the  instrument  of  April  24, 
1860,  which  precluded  him  from  purchasing  for  himself,  or  other- 
wise than  as  a  trustee  for  Stewart,  or  his  grantee.  Assuming  that 
the  learned  counsel  for  the  plaintiff  is  correct  in  the  position  that 
Craig,  at  the  time  of  the  sheriff's  sale,  stood,  in  relation  to  the 
premises,  in  the  character  of  mortgagee  in  possession,  the  question 
arises,  whether  a  mortgagee  in  possession  can  buy  the  mortgagor's 
title  on  an  execution  sale,  upon  a  judgment  in  favor  of  a  third  per- 
son against  the  mortgagor,  and  set  up  a  title  under  the  sale,  as  a 
defence  to  an  action  by  the  mortgagor  to  redeem.  Another  mode 
of  stating  the  question  is:  Is  a  mortgage  in  possession  a  trustee 
for  the  mortgagor,  so  that  he  will  not  be  allowed  to  buy  in  the 
equity  of  redemption  on  a  sale  upon  an  independent  lien  held  by  a 
third  person? 

Unless  the  mortgagee  in  possession  is  a  trustee  for  Mie  mort- 
gagor, there  is  no  ground  upon  which  he  can  be  precluded  from  pur- 
chasing. It  is  clear  that  no  trust  relation  between  the  mortgagor 
and  mortgagee  is  created  by  the  execution  of  the  mortgage,  unac- 
companied by  possession.  The  mortgage  under  our  law  is  a  se- 
curity merely.  The  mortgagee  has,  by  virtue  of  his  mortgage,  no 
estate  in  or  title  to  the  land,  or  the  right  of  possession,  before  or 
after  the  mortgage  debt  becomes  due.  He  owes  the  mortgagor  no 
duty  to  protect  the  equity  of  redemption.  The  power  of  sale 
which  usually  accompanies  a  mortgage  is  given  to  enable  him, 
by  an  adverse  proceeding,  to  sell  the  equity  of  redemption  for  the 
payment  of  the  mortgage  debt.  The  objection  that  he  could  not 
become  the  purchaser  at  his  own  sale  under  the  power  has  been 
removed  by  the  statute  when  the  foreclosure  is  by  advertisement 
(2  R.  S.  546,  §  7);  and  a  provision  is  inserted  in  every  decree  for 
the  sale  of  mortgaged  premises,  unless  otherwise  specially  or- 
dered, that  the  plaintiff  may  become  the  purchaser.  (Rule  73.) 
And  he  may  buy  in  any  outstanding  title  and  hold  it  against  the 
mortgagor.  {Cameron  v.  Irwin,  5  Hill,  280;  Williams  v.  Townsend, 
31  N.  Y.  415;  Shaw  v.  Bunny,  13  Week.  R.  374;  s.  c,  2  De  G.,  J. 

&  S.  468.) 

There  is,  in  truth,  no  relation  analogous  to  that  of  trustee  and 


TEN   EYCK   V.    CRAIG  491 

cestui  que  trust  between  the  mortgagor  and  mortgagee  created  by 
the  execution  of  the  mortgage.  The  mortgagee  is  not  a  trustee  of 
the  legal  title,  because,  under  our  law,  he  has  no  title  whatever. 
(Kortright  v.  Cady,  21  N.  Y.  342,  and  cases  cited.)  He  may  deal 
with  the  mortgagor,  in  respect  to  the  mortgaged  estate,  upon  the 
same  footing  as  any  other  person;  he  may  buy  in  incumbrances  for 
less  than  their  face,  and  hold  them  against  the  mortgagor  for  the 
full  amount;  he  may  do  what  any  other  person  may  do,  and  his 
acts  are  not  subject  to  impeachment,  simply  because  he  is  mort- 
gagee. (Darcy  v.  Hall,  1  Vern.  48;  Knight  v.  Majoribanks,  2  Mac 
N.  &  G.  10;  Chambers  v.  Waters,  3  Sim.  42;  3  ^ug.  on  V.  and  P. 
227.) 

Nor  is  the  mortgagee  converted  into  a  trustee  by  taking  posses- 
sion as  mortgagee  of  the  mortgaged  property,  so  as,  in  general,  to 
prevent  his  purchasing  an  outstanding  title,  or  under  another  lien. 
Under  the  English  law  he  has  the  right  to  the  possession,  because  he 
has  the  legal  title  to  the  land.  Under  our  law  he  cannot  obtain 
possession  until  foreclosure,  except  by  the  consent  of  the  mort- 
gagor, because  until  that  time  he  has  no  title.  A  mortgagee  is 
often  called  a  trustee,  and  in  a  very  limited  sense  this  character  may 
be  attributed  to  him.  There  may  be  a  duty  resting  upon  a  mort- 
gagee in  possession  to  discharge  a  particular  claim  against  the  land. 
If  in  such  a  case  he  omits  to  do  it,  and  allows  the  land  to  be  sold  on 
such  a  claim,  and  becomes  the  purchaser,  he  would  hold  the  title 
in  trust  for  the  mortgagor.  A  mortgagee  in  possession  is  allowed, 
and  it  may  be  his  duty  to  pay  taxes  on  the  and  out  of  the  rents  and 
profits.  If  he  suffers  the  land  to  be  sold  for  taxes  in  violation  of 
his  duty,  and  purchases  on  the  sale,  he  would  upon  general  princi- 
ples be  deemed  to  hold  the  title  as  trustee.  So,  if  a  mortgagee  is 
allowed  to  take  possession  and  undertakes  to  pay  the  interest  on 
other  liens  out  of  the  rents  and  profits  and  fails  to  do  so,  he  could 
not  purchase  the  land  for  his  own  benefit  in  hostility  to  the  mort- 
gagor on  a  foreclosure  of  an  incumbrance  for  non-payment  of  in- 
terest which  he  was  bound  to  pay.  A  mortgagee  in  possession  is 
bound  to  account  for  the  rents  and  profits;  and  in  that  respect,  as 
was  said  by  Shaw,  C.  J.,  in  King  v.  Insurance  Co.,  7  Gush.  7,  he 
may  be  denominated  a  trustee.  But,  except  in  some  special  sense, 
that  is  not  the  relation  he  bears  to  the  mortgagor.  The  relation 
of  mortgagor  and  mortgagee  is  explained  in  the  admirable  judgment 
of  Sir  Thomas  Plumer,  in  the  leading  case  of  Chohnondeley  v.  Lord 
Clinton,  2  Jac.  &  Walk.  183.  He  says:  "It  is  only  in  a  secondary 
point  of  view  and  under  certain  circumstances,  and  for  a  particular 


492  EQUITY   RELATIONS 

purpose  that  the  character  of  a  trustee  constructively  belongs  to  a 
mortgagee.  No  trust  is  expressed  in  the  contract;  it  is  only  raised 
by  implication  in  subordination  to  the  main  purpose  of  it,  and  after 
that  is  fully  satisfied  its  primary  character  is  not  fiduciary,"  And 
again:  "The  mortgagee  when  he  takes  possession  is  not  acting  as  a 
trustee,  but  independently  and  adversely  for  his  own  benefit." 
A  mortgagee  in  possession  may  purchase  from  a  prior  mortgagee 
and  get  an  irredeemable  title.  (Kirkwood  v.  Thompson,  2  De  G., 
J.  &  S.  613,  and  cases  cited;  Parkinson  v.  Hanbury,  2  D.  &  S.  143; 
s.  c,  2  De  G.  &  S.  450;  see,  also,  Shaw  v.  Bunny,  supra;  Knight  v. 
Marjorihanks,  supra.)  Lord  Cranworth,  in  Kirkwood  v.  Thomp- 
son, referring  to  the  fact  that  the  mortgagee  at  the  time  of  the  pur- 
chase was  in  possession,  says:  "That  makes  no  difference;  being 
in  possession  could  only  make  a  difference  if  it  created  an  obliga- 
tion between  the  mortgagee  and  mortgagor,  which  would  not  have 
existed  if  he  had  not  been  in  possession.  Nothing  of  this  sort  is 
suggested;  no  duty  arises  on  being  in  possession  except  to  account 
in  a  way  onerous  to  the  mortgagee." 

A  mortgagee  in  possession  is  sometimes  spoken  of  as  a  tenant  and 
as  having  the  legal  rights  of  a  tenant.  (2  Wash.  150.)  The  analogy 
is  not  very  close  between  the  two  relations;  but  it  is  difficult  to  see 
any  reason  for  denying  the  right  of  a  mortgagee  to  purchase  and 
hold  adversely  to  the  mortgagor  in  a  case  when  a  tenant  in  posses- 
sion would  be  allowed  to  purchase  and  hold  against  the  landlord; 
and  yet  a  tenant  may  purchase  the  demised  premises  on  a  sale  on 
execution  against  the  landlord,  and  when  his  title  is  perfected, 
may  set  it  up  in  bar  of  a  recovery  for  rent  thereafter  accruing  on  the 
lease.    {Nellis  v.  Lathrop,  22  Wend.  121.) 

The  first  ground  stated  upon  which  it  is  claimed  that  Craig  was 
disabled  from  purchasing  on  the  sheriff's  sale,  viz.,  that  he  was  the 
mortgagee  in  possession,  cannot,  I  think,  be  supported;  and  it  re- 
mains to  consider  whether  such  disabiHty  existed  by  reason  of  the 
agreement  of  April  24,  1860.  The  purpose  of  that  agreement  was 
to  secure  Craig  for  becoming  surety  for  Stewart  on  the  undertaking 
on  the  appeal  from  the  Dehon  judgment.  This  purpose  is  recited 
in  the  instrument.  The  object  was  the  protection  of  Craig;  and  if 
any  trust  in  favor  of  Stewart  resulted  from  the  provisions  of  the 
instrument  it  was  incidental  and  collateral  to  its  primary  intent.^ 

I  am  unable  to  discover  any  duty  arising  out  of  the  contract  of 
April  24,  1860,  or  the  circumstances  resting  upon  Craig  which  de- 
barred him  from  purchasing,  on  his  own  account,  on  the  execution 
^  This  part  of  the  opinion  is  omitted. 


TEN   EYCK   V.    CRAIG  493 

sale.  He  was,  in  some  sense,  a  trustee  of  the  rents  received  under 
the  arrangement,  and  was  bound  to  dispose  of  them  as  required  by 
the  agreement,  and  this  was  the  extent  of  his  duty.  He  was  not 
bound  to  protect  Stewart  against  the  loss  of  the  rents  through  a 
sale  of  the  land  on  the  bank  judgment.  If  a  mortgagee  in  pos- 
session may  purchase  for  himself  on  a  foreclosure  of  another  mort- 
gage, or  buy  in  an  outstanding  title,  then  a  fortiori  could  a  person 
in  the  position  of  Craig.  The  mortgagee  under  the  English  law  has 
the  entire  legal  title,  and  so  far  as  he  is  regarded  as  trustee,  the 
trust  is  the  whole  interest  of  the  mortgagor.  Craig  at  most  was  a 
trustee  of  the  rents  for  a  term  only.  He  had  by  the  agreement  no 
interest  as  trustee  or  otherwise  in  the  fee  which  he  purchased  on  the 
execution  sale. 

The  conclusion  which  I  have  reached  is  adverse  to  the  existence 
either  in  Stewart  or  Sanger  of  a  right  to  redeem,  and  it  becomes 
unnecessary  to  consider  whether,  assuming  such  right  to  exist,  the 
plaintiff,  as  grantee  of  Mrs,  Sanger,  succeeded  to  it.  The  rule 
which  avoids  purchases  made  in  violation  of  his  duty  at  the  election 
of  the  cestui  que  trust  is  a  valuable  one  and  ought  not  to  be  im- 
paired by  engrafting  upon  it  exceptions,  or  indulging  in  subtle  re- 
finements and  distinctions  to  withdraw  a  particular  case  out  of  its 
influence.  But  after  careful  consideration,  I  am  unable  to  perceive 
that  the  facts  of  this  case  bring  it  within  the  rule,  and  am  therefore 
of  opinion  that  the  order  should  be  affirmed,  and  judgment  abso- 
lute given  for  defendants,  pursuant  to  stipulation,  with  costs. 

All  concur,  except  Church,  Ch.  J.,  not  voting.  Folger,  J., 
not  sitting. 

Order  affirmed,  and  judgment  accordingly} 

'  The  cases  generally  are  accord.  case  to  a  sale  under  a  judgment  of 

But  see  Harrison  v.  Roberts,  6  Fla.  a  third  person  having  a  lien  para- 

711     (1856);     Walthall's     Exrs.     v.  mount    to    that    of    the    mortgage. 

Rives,  34  Ala.  92  (1859),  and  Roberts  Compare  Griffin  v.  Marine  Co.,  52 

V.  Fleming,  53  111.  106  (1870),  semhie,  111.  130  (1869). 
limiting  the  doctrine  of  the  principal 


494  EQUITY    RELATIONS 

HALL  V.  WESTCOTT 
Supreme  Court  of  Rhode  Island,  1886 
(15  R.  I.  373) 
Bill  in  equity  to  redeem  a  mortgage  and  for  an  account. 

Durfee,  C.  J.  The  bill  states  that  on  October  23,  1873,  Walter 
J.  Reynolds,  being  the  owner  of  a  lot  in  Providence,  mortgaged  it 
for  $800  to  Stephen  H.  Williams;  that  subsequently  the  lot  passed 
by  mesne  conveyances  to  Charles  W.  Adams,  who,  December  30, 
1874,  gave  two  mortgages  thereon  to  Hiram  C.  Pierce,  to  wit,  one 
for  $3250,  and  one  for  $500,  subject  to  the  mortgage  for  $3250; 
that  the  mortgage  for  $3250,  though  taken  solely  in  Pierce's  name, 
belonged  equally  to  him  and  the  complainant  Harriet  Hall;  that 
Pierce  assigned  the  mortgage  for  $3250  to  the  defendant  Charles 
A.  Westcott,  who  thereupon,  January  23,  1875,  gave  the  complain- 
ant Harriet  Hall  a  writing  in  which  he  declared  that  he  held  said 
mortgage  as  to  one-half  in  trust  for  her;  that  said  Pierce  sub- 
sequently assigned  said  mortgage  for  $500,  and  his  interest  in  said 
mortgage  for  $3250  to  said  Harriet,  and  that  said  mortgage  for 
$500  contained  a  power  of  sale  under  which,  in  January,  1882, 
said  Harriet  duly  sold  the  estate,  buying  it  herself  under  notice 
as  authorized  by  statute.  The  bill  alleges  that  the  defendant  is 
in  possession,  and  contains  other  allegations.  It  asks  for  an  ac- 
count and  for  leave  to  redeem.  The  defendant  sets  up  several 
defences.^ 

The  third  defence  is  that  the  mortgaged  lot  was  sold  for  the  non- 
payment of  taxes,  and  bought  by  and  conveyed  to  the  defendant. 
This  raises  the  question  whether  a  mortgagee  or  his  assignee,  out  of 
possession,  can  become  a  purchaser  at  a  tax  sale  with  the  same 
effect,  as  against  the  mortgagor  and  other  mortgagees,  as  if  he  were 
a  stranger  to  the  estate.  There  is  some  conflict  of  authority  on  this 
point.  All  the  cases  agree  that  there  are  persons  who  stand  in 
such  relations  to  the  estate  that  they  cannot  purchase  as  if  they 
were  strangers.  No  person  whose  duty  it  is  to  pay  the  tax  can  be 
permitted  to  purchase  at  a  sale  for  its  non-payment,  and  acquire 
a  good  title  as  against  others  who  are  interested  in  the  estate,  since 
to  permit  him  to  do  so  would  be  to  permit  him  to  profit  by  his  own 
default.     Under  this  rule  mortgagors,  mortgagees  in  possession, 

1  The  consideration  of  the  first  and  second  defenses  is  omitted. 


HALL   V.    WESTCOTT  495 

life  tenants,  and  tenants  obligated  by  contract  to  pay  the  taxes,, 
are  incapacitated   to   become  purchasers.     The  incapacity  has 
hkewise  been  held  to  extend  to  tenants  in  common,  for,  if  the  estate 
is  sold  for  taxes  to  one  of  the  tenants,  it  is  sold  for  his  default  as 
well  as  for  the  default  of  his  co-tenants.    (Page  v.  Webster,  8  Mich. 
263;  Butler  v.  Porter,  13  Mich.  292;  Cooley  v.  Waterman,  16  Mich. 
366;  Cooley  on  Taxation,  346,  347.)    So  a  person  who  occupies  a 
fiduciary  relation  as  regards  the  estate,  cannot  purchase  it  for  him- 
self.    The  trust  in  the  one-half  of  the  mortgage  for  $3250  is  pro- 
tected under  this  rule.    And  there  are  cases  which  enounce,  or  at 
least  presuppose,  a  still  broader  doctrine,  which  may  be  stated 
thus,  namely:  that  a  purchaser  who  has  an  interest  in  the  estate, 
such  as  would  entitle  him  to  redeem  it  if  sold  to  another,  will  be 
presumed  to  have  purchased  it  for  the  protection  of  that  interest, 
or  to  save  it  from  sacrifice,  and  will  be  required  to  hold  it,  even 
after  the  statutory  period  for  redemption  has  expired,  simply  as 
security  for  his  reimbursement.     We  find  this  doctrine  nowhere 
n.  )re  clearly  asserted  than  in  Fair  v.  Brown,  40  Iowa,  209.    The 
defendant  there  was  interested  in  the  estate  b}^  judgment  lien  and  as 
a  second  mortgagee.    He  bought  certificates  of  sale  for  taxes,  and 
subsequently  took  the  tax  deed.     The  court  held  that  the  prior 
mortgage  was  not  defeated.     "The  land,"  says  the  court,  "is  a 
common  fund  for  the  payment  of  the  plaintiff's,"  i.  e.,  the  prior 
mortgagee's,  "mortgage  and  the  defendant's  liens.    Defendant  was 
authorized  to  redeem  from  the  tax  sale.    Equity  will  not  permit 
him  to  acquire  the  title  for  an  inconsiderable  sum  when  he  was 
authorized  to  remove  the  trifling  incumbrance  by  redemption. 
Though  not  bound  to  pay  the  tax,  yet  it  was  his  right  to  do  so  to 
protect  his  liens.    He  cannot  obtain  that  protection  by  pursuing 
a  course  that  will  deprive  the  mortgagee  of  his  security,  and  leave 
the  mortgagor  to  sustain  the  weight  of  the  liens,  which  are  personal 
judgments,  after  being  deprived  of  his  property  by  tax  title.    (Gar- 
rettson  v.  Scofield,  44  Iowa,  35;  Porter  v.  Lafferty,  33  Iowa,  254; 
Stears  v.  Hollenhech,  38  Iowa,   550.)"     In  Aliddletown  Savings 
Bank  v.  Bacharach,  46  Conn.  571,  the  defendant,  having  had  an 
undivided  eighth  of  an  estate  subject  to  a  mortgage  set  out  to  him 
under  an  execution,  purchased  the   estate  at  a  sale  for  taxes 
assessed  before  he  became  interested  in  it,  and  the  court  held 
that  he  could  not  set  up  the  tax  title  to  defeat  the  mortgage,  he 
being  entitled  to  redeem  the  mortgage,  which  yet  he  could  not  do, 
if  the  mortgagee  had  paid  the  taxes,  without  reimbursing  him. 
The  court  also  said  that  the  mortgagee  was  similarly  incapaci- 


496  EQUITY   RELATIONS 

tated,  because  he  could  pay  the  tax  and  add  the  amount  of  it  to  the 
mortgage  debt.  In  Connecticut  Mut.  Life  Ins.  Co.  v.  Bulte,  45 
Mich.  113,  the  court  lays  down  the  doctrine  that  where  a  mort- 
gagee, or  one  of  two  or  more  mortgagees,  purchases  the  estate  at  a 
tax  sale,  the  purchase  may  be  treated  as  payment.  "It  is  as  just 
and  as  poHtic  here,"  says  the  court,  "as  it  is  in  the  case  of  tenants 
in  common,  to  hold  that  the  purchase  is  a  pajmient  of  the  tax." 
In  the  later  case  of  Maxfield  v.  Willey,  46  Mich.  252,  the  court 
affirms  the  doctrine.  "When  the  mortgagee,"  says  the  court, 
"instead  of  making  payment  of  the  taxes,  makes  a  purchase  of 
the  land  at  tax  sale,  we  have  no  doubt  of  the  right  of  the  mort- 
gagor to  have  the  purchase  treated  as  a  payment,  and  to  compel 
the  cancelment  of  the  certificate  or  deed  on  refunding  the  amount 
paid  with  interest."  The  opinions  in  these  cases  were  delivered  by 
Judge  Cooley,  who,  in  the  preparation  of  his  book  on  Taxation, 
had  occasion  to  make  the  subject  a  special  study. 

The  most  recent  case  which  we  have  met  with  is  Woodbury  v. 
Swan,  59  N.  H.  22,  in  which  the  Supreme  Court  of  New  Hamp- 
shire decided  that  the  holder  of  a  mortgage  cannot  defeat  a  prior 
mortgage  by  acquiring  a  tax  title.  The  court  rest  their  decision 
on  the  following  reasons,  as  declared  by  Bingham,  J.,  in  delivering 
the  opinion  of  the  court:  "Mortgagor  and  mortgagee  have  a  unity 
of  legal  interest  in  the  protection  of  their  titles  against  sale  for  the 
non-payment  of  taxes,  and  against  outstanding  tax  titles;  and  it  is 
not  equitable  that  either  of  them  should  act  adversely  to  the  other 
in  the  acquisition  and  use  of  such  titles.  Therefore  the  mortgage 
contract  comprises  an  implied  agreement  that,  while  either  party 
may  buy  a  tax  title  for  the  preservation  of  his  right  in  the  mort- 
gaged property,  neither  of  them  will  buy  a  tax  title  for  the  extin- 
guishment of  the  title,  in  the  maintenance  of  which  they,  as  well 
as  partners  and  tenants  in  common,  are  in  law  jointly  concerned. 
The  common  interest  of  these  parties  in  the  mortgaged  property 
creates  a  relation  of  trust  and  confidence." 

Other  cases  may  be  cited  which  support  the  same  view,  though 
not  always  for  the  same  reasons.  (Moore  v.  Titman,  44  111.  357; 
Harkreader  v.  Clayton,  56  Miss.  383;  Haskell  v.  Putnam,  42  Me. 
244;  Bassett  v.  Welch,  22  Wise.  175;  Whitney  v.  Gunderson,  31  Wise. 
359,  379;  Chickering  v.  Failes,  26  111.  507;  McLaughlin  v.  Green, 
48  Miss.  175.)  In  California  it  is  held  that  a  person  who  is  under 
any  obligation,  either  moral  or  legal,  to  pay  the  taxes,  cannot  be- 
come a  purchaser.  (Moss  v.  Shear,  25  Cal.  38;  Christy  v.  Fisher, 
58  Cal.  256.) 


HALL   V.    WESTCOTT  497 

Other  cases  adopt  a  narrower  view,  and  maintain  that  any  per- 
son can  become  a  purchaser  who  is  not  under  any  legal  duty  to 
pay  the  taxes.  {Williams  v.  Townsend,  31  N.  Y.  411;  Waterson 
V.  Devoe,  18  Kans.  223;  Bettison  v.  Budd,  17  Ark.  546;  Ferguson 
V.  Etter,  21  Ark.  160.) 

Our  conclusion  is  that  a  mortgagee,  either  in  possession  or  out 
of  possession,  is  not  entitled  to  purchase  the  estate  at  a  tax  sale, 
and  set  up  the  tax  title  as  against  the  mortgagor  or  the  other  mort- 
gagees. They  all  have  a  common  interest  in  the  preservation  of 
the  estate,  and  therefore,  if  either  of  them  purchases  the  estate 
at  a  tax  sale,  it  should  be  presumed  in  favor  of  the  others  that  he 
made  the  purchase  for  the  common  protection.^ 

We  think  a  case  is  shown  which  entitles  the  complainants  to 
relief. 

^Schenck   v.   Kelley,   88   Ind.   444       (1882),  accord.     Compare  Medley  v. 

Elliott,  62  111.  532  (1872). 


CHAPTER  III 
EXTENSION  OF  MORTGAGE 

VANHOUTEN   v.   McCARTY 

Court  of  Chancery  of  New  Jersey,  1842 

(4  iV.  J.  Eq.  141) 

The  Chancellor  [Pennington].^  In  1836,  during  the  rage 
for  speculation  in  real  estate,  the  complainant  sold  his  farm,  in  the 
neighborhood  of  Paterson,  to  the  defendant,  John  McCarty,  for 
thirteen  thousand  dollars;  the  conveyance  was  made  on  the  twenty- 
seventh  of  April,  1836,  and,  to  secure  so  much  of  the  considera- 
tion money,  the  defendant  executed  to  the  complainant  a  bond  and 
mortgage,  in  the  same  day,  for  ten  thousand  eight  hundred  and 
twenty-two  dollars  and  fifty  cents,  on  the  premises,  payable  in  the 
following  manner:  one  thousand  dollars  on  the  twenty-ninth  of 
September,  then  next;  two  thousand  dollars  on  the  first  of  May, 
1837,  and  the  residue  on  the  first  of  May,  1838,  with  interest  from 
the  first  of  May  next  after  the  date  of  the  bond,  payable  on  the 
first  days  of  November  and  May  in  each  year. 

On  the  same  day  that  McCarty  got  his  deed,  he  conveyed  the 
property  to  Kirk,  Johnston  and  Copland,  and  they,  under  an  agree- 
ment made  by  McCarty  with  Edward  N.  Rogers  and  John  A.  Stim- 
ler  for  a  large  advance,  conveyed  the  property  to  them,  by  deed 
dated  the  twenty-fourth  of  September,  1836.  Since  the  last  deed, 
Edward  N.  Rogers  and  John  A.  Stimler  have  conveyed  to  Archi- 
bald G.  Rogers,  who  has  also  conveyed  to  Nehemiah  Rogers,  in 
whom  the  equity  of  redemption  now  resides. 

The  bill  is  filed  for  the  foreclosure  and  sale  of  these  premises, 
under  the  mortgage  made  by  McCarty  to  the  complainant. 

A  decree  pro  confesso  was  taken  against  McCarty  and  wife,  Ed- 
ward N.  Rogers  and  Stimler.  Archibald  Rogers  and  Nehemiah 
Rogers  have  filed  separate  answers,  upon  which  the  cause  has  been 
put  at  issue,  and  depositions  taken. 

1  The  opinion  only  is  given. 
498 


VANHOUTEN    V.    MCCARTY  499 

The  first  ground  of  defence  set  up  is  that  the  transaction  is 
usurious,  and  the  bond  and  mortgage  therefore  void.^ 

The  next  point  taken  arises  from  the  object  the  purchasers 
had  in  buying  this  property.  They  intended  to  set  it  off  in  building 
lots,  and  Edward  N.  Rogers,  who  had  agreed  in  his  purchase  with 
McCarty  for  five  years  for  the  payment  of  the  money,  after  getting 
his  deed,  learned  for  the  first  time,  from  the  complainant,  that  the 
bond  and  mortgage  were  payable  at  an  earlier  day;  he  expressed 
his  surprise,  and  told  the  complainant  that  he  should  look  to 
McCarty  and  those  concerned  with  him  to  make  good  their  agree- 
ment; when  the  complainant  told  the  witness  that  he  did  not  be- 
lieve there  would  be  any  difficulty,  as  his  great  object  was  to  get  his 
interest;  that  the  witness  thereupon  told  complainant  he  would 
think  over  the  subject  and  make  him  a  proposition.  The  witness 
then  says,  that  the  same  afternoon  he  called  on  the  complainant, 
and  told  him  he  would  make  thi^  agreement  with  him — that  if  he 
would  extend  the  time  of  payment  of  the  bond  five  years  from  the 
twenty-seventh  of  April  ensuing  its  date,  making  six  years  in  all, 
and  release  the  lots  that  deponent  and  Stimler  should  sell  from  the 
lien  of  the  mortgage  (provided  such  release  did  not  exceed  one- 
fourth  of  the  property)  on  his  being  paid  for  the  property  thus  re- 
leased, or  having  the  bonds  and  mortgages  given  for  their  purchase 
money  assigned  to  him,  that  complainant  might  retain  the  pos- 
session of  the  residue  of  the  farm  free  of  rent,  and  that  no  claim 
would  be  made  for  rent  for  the  time  he  had  already  occupied  it. 
This  proposition,  he  says,  was  agreed  to  by  the  complainant. 

The  evidence  then  proceeds  to  show  that  the  complainant  is 
guilty  of  a  breach  of  this  agreement;  and  it  is  insisted  by  the 
answer  that  the  defendant,  Nehemiah  Rogers,  is  entitled,  before 
the  complainant  can  have  his  decree  in  this  cause,  to  a  specific  per- 
formance of  the  complainant's  agreement  to  release  lots  as  they 
should  be  sold  on  the  premises,  or  to  have  his  damages  for  such 
breach  of  his  agreement  set  off  against  the  amount  of  the  bond  and 
mortgage. 

This  is  taking  a  wide  range,  and  involving  in  a  case  of  foreclosure 
of  a  mortgage  a  great  variety  of  matters  and  endless  litigation.  If 
this  defence  should  be  sustained,  I  see  no  limit  on  a  bill  of  fore- 
closure to  settling  before  decree  every  agreement  and  controversy 
respecting  the  land  between  the  complainant  and  all  the  inter- 

1  The  discussion  of  this  point   is      dence   fails   to   establish   a   case  of 
omitted.      The    learned    Chancellor      usury, 
reaches  the  conclusion  that  the  evi- 


500  EXTENSION   OF   MORTGAGE 

mediate  owners  down  to  and  including  the  present,  and  that,  too, 
whether  the  mortgage  has  any  connection  with  them  or  not.  This 
agreement  is  not  made  with  the  mortgagor,  but  with  Edward 
N.  Rogers,  an  intermediate  owner,  and  is  declared  to  have  been 
entered  into  long  after  the  mortgage  was  made,  and  for  purposes 
connected  with  the  property  growing  out  of  the  manner  in  which 
sales  were  proposed  to  be  made.  The  defendant  must,  in  my  opin- 
ion, be  left  on  this  agreement  to  his  remedy  at  law.  The  complain- 
ant is  able  to  refund  in  damages,  as  it  is  stated,  for  any  amount  in 
which  he  may  be  justly  chargeable,  and  there  is  no  safe  mode  in 
this  court  of  settling  questions  of  this  character;  it  is  properly  a 
case  for  a  jury  to  assess  the  damages,  and  not  for  investigation 
before  this  court.  The  evidence  would  lead  me  to  believe  that  the 
complainant  has  not  regarded,  as  he  should  have  done,  the  position 
of  men  who  had  purchased  property  at  so  expensive  a  rate,  and 
who  had  no  way  of  remunerating  themselves  but  by  selling  off 
lots;  still,  I  do  not  see  how  the  defendant  can  avail  himself  of  such 
a  defence  in  this  action.  Can  this  court  decree  a  specific  perform- 
ance against  the  complainant  of  his  agreement  in  this  action? 
There  is  no  precedent  for  such  a  course  of  practice,  and  to  attempt 
to  settle  the  damages  incident  to  a  breach  of  such  an  agreement 
would  be  equally  against  the  course  of  procedure.  I  am,  there- 
fore, of  opinion,  that  this  defence  cannot  avail  the  defendant  in 
this  action. 

The  last  objection  is,  that  the  time  of  payment  for  the  principal 
was  extended  by  the  complainant  for  five  years  from  the  twenty- 
seventh  of  April,  1837,  and  the  bond  and  mortgage  will  of  course 
not  be  due  until  the  twenty-seventh  of  April,  1842.  This  is  clearly 
established,  from  the  evidence,  and  the  defendant  is  entitled  to 
this  time  before  payment  can  be  demanded.  Edward  N.  Rog- 
ers expressly  so  swears,  and  the  whole  evidence,  as  well  as  the  state- 
ment in  the  complainant's  bill,  go  to  show  such  an  understanding. 
It  is  well  settled,  that  the  time  for  payment  may  be  extended  by 
parol.  (Chitty  on  Contracts,  27,  in  note;  1  John.  Cases,  23;  3 
John.  528;  2  Wendell,  587;  14  John.  330;  1  Green,  165;  Saxton, 
280.)  ' 

There  must,  therefore,  be  a  reference  to  a  master,  to  ascertain 
and  report  the  amount  due  the  complainant  for  interest  on  the 
bond  and  mortgage,  after  deducting  a  fair  compensation  for  the 
use  and  occupation  of  the  farm;  and  also,  whether  a  part  of 
the  premises  can  be  sold  without  material  injury  to  the  rest.  The 
1  Tompkins  v.  Tompkins,  21  N.  J.  Eq.  338  (1871). 


DODGE    V.    CRANDALL  501 

justice  of  this  case,  as  far  as  I  am  able  to  reach  it  in  this  suit,  as 
it  appears  to  me,  is  to  consider  the  time  of  payment  for  the  princi- 
pal of  the  bond  enlarged  to  the  twenty-seventh  of  April  next,  leav- 
ing the  interest  payable  half  yearly.  The  contract  made  for  com- 
plainant's enjoying  the  possession  free  of  rent,  is  part  of  the  one 
for  releasing  a  portion  of  the  lands,  subsequently  made  with  Mr. 
Rogers,  and  must  be  settled  with  that.^ 


DODGE  V.   CRANDALL 
Court  of  Appeals  of  New  York,  1864 
(30  N.  Y.  294) 
Appeal  from  a  judgment  of  the  Supreme  Court.^ 

Wright,  J.  The  mortgage  sought  to  be  foreclosed  by  action  was, 
in  the  winter  of  1858-9,  held  by  the  administrator  of  S.  V.  R. 
Mallory,  deceased.  The  premises  covered  by  it  had,  after  its  exe- 
cution, and  about  the  23d  February,  1856,  been  conveyed  by  the 
mortgagor  to  the  defendant  Holcomb,  who  assumed  the  payment 
of  the  mortgage  as  a  part  of  the  purchase  price  of  the  premises. 
The  mortgagor  had  paid  the  interest,  and  $266.66  of  the  principal 
sum  secured  by  it,  before  the  sale  and  transfer  of  the  premises  to 
Holcomb.  Afterwards  Holcomb  paid  the  interest.  The  whole 
principal  became  due  and  payable  on  the  1st  March,  1858.  Shortl}^ 
before  the  28th  February,  1859  (the  administrator  of  Mallory 
being  about  to  foreclose  the  mortgage),  Holcomb  entered  into  an 
agreement  with  the  plaintiff's  testator,  whereby  the  latter  agreed 
to  purchase  the  mortgage  of  Mallory's  administrator,  who  then 
held  the  same,  and  extend  the  time  of  payment  five  years,  or  give 
that  additional  time  from  the  time  he  took  the  assignment,  to  pay 
the  balance  due  upon  the  bond  and  mortgage;  in  consideration  of 
which,  Holcomb  agreed  to  pay  him  fifty  dollars,  which  he  did  pay, 
and  Holberton  took  the  assignment  of  the  mortgage,  and  continued 
to  hold  the  same,  and  receive  payments  of  interest  thereon  up  to 

'  See  also,  Van  Syckel  v.  0'Hear?i,  by  a  parol  agreement.     I  think  all 

50  N.  J.  Eq.  173  (1892),  where  Bird,  ,  of  the  authorities,   in  this  State  at 

V.  C,  said:  ''The  complainants  say  least,  hold  the  time  for  performance 

that  the  obligation  being  in  writing  of  every  such  contract  may  be  ex- 

and  imder  seal,  the  time  for  the  per-  tended  by  parol." 
formance  thereof  cannot  be  enlarged  -  The  statement  of  facts  is  omitted. 


502  EXTENSICN   OF    MORTGAGE 

his  death.  The  bond  and  mortgage  were  assigned  to  the  plaintiff's 
testator  on  28th  February,  1859,  and  the  time  agreed  to  be  given 
to  Holcomb  to  make  payment  would  not  expire  until  the  28th  Feb- 
ruary, 1864. 

This  foreclosure  suit  was  brought  in  June,  1862,  and  the  ques- 
tion is  whether  the  executor  of  Holberton  is  entitled  to  sustain  it, 
notwithstanding  the  contract  of  his  testator  to  purchase  the  mort- 
gage, and  forbear  foreclosing  it  for  five  years;  or,  in  other  words, 
to  extend  the  time  of  payment  of  the  debt  secured  to  be  paid  by  it, 
and  which  was  due,  for  five  years  from  such  purchase.  If  Holber- 
ton, in  the  face  of  his  contract,  was  not  entitled  to  maintain  an 
action  to  collect  the  principal  secured  by  the  mortgage  bj^  a  fore- 
closure thereof  before  the  five  years  elapsed,  it  is  very  clear  his 
representative  is  not. 

The  ground  taken  at  the  trial  was  that  the  contract  was  void 
by  the  statute  of  frauds,  not  being  in  writing,  and  being  an  agree- 
ment that  by  its  terms  was  not  to  be  performed  within  one  year 
from  the  making  thereof.  (2  R.  S.  135,  §  2,  sub.  1.)  I  am  of  the 
opinion  that  it  was  not  affected  by  the  statute.  The  statute  ap- 
plies to  executory,  and  not  to  executed  contracts;  and  the  one  in 
question,  I  think,  was  t)f  the  latter  description.  It  was  certainly 
executed  by  Holcomb;  and  it  seems  to  me  the  purchase  of  the  mort- 
gage by  the  plaintiff's  testator  was  an  execution  on  his  part.  Hol- 
berton agreed  in  substance  to  purchase  the  mortgage,  and  forbear 
to  foreclose  it  for  five  years,  in  consideration  of  fifty  dollars.  He 
did  purchase,  and  take  an  assignment  of  it,  and  Holcomb  paid  him 
the  fifty  dollars.  Thus,  the  contract  was  fully  executed.  Nothing 
further  remained  to  be  done  by  either  party.  Holberton  had  simply 
to  wait  five  years  for  his  money.  Holcomb  had  paid  the  consider- 
ation money,  and  Holberton  had  entered  upon  the  contract  by 
receiving  the  money  and  purchasing  the  mortgage,  and  neither 
party  could  rescind  it.  Neither  could  Holcomb  recover  back  the 
money,  nor  Holberton  refuse  to  carry  out  the  contract,  based  as  it 
was  upon  a  good  consideration,  and  which  he  had  undertaken  to 
execute. 

The  further  point  is  now  urged  (although  not  alluded  to  on  the 
trial),  that  the  mortgage  being  a  specialty,  no  agreement  in  regard 
to  it  could  be  valid  unless  the  agreement  was  also  a  specialty.  It 
may  be  conceded  that  ordinarily  a  sealed  executory  contract  can- 
not be  rescinded  or  modified  by  a  parol  executory  contract;  but 
that  was  not  this  case.  Here  the  mortgage  was  due.  The  holder 
was  about  to  enforce  it  by  action;  whereupon  Holberton  agrees,  for 


DODGE    V.    CRANDALL  503 

a  valuable  consideration,  to  purchase  and  refrain  from  collecting 
it  for  five  years.  This  agreement  is  executed  bj^  the  purchase; 
and  as  respected  the  plaintiff's  testator,  operated  as  effectually  to 
extend  the  time  of  payment  as  if  it  had  been  under  seal.  Indeed, 
as  title  to  the  mortgage  would  pass  by  mere  deliver>'  without  a 
written  assignment,  I  cannot  see  wh}-  an  agreement  to  extend  the 
time  of  payment,  if  founded  upon  a  good  consideration,  would  not 
be  valid  and  effectual  for  that  purpose,  even  if  executory,  and  not 
reduced  to  writing.  The  agreement,  in  this  case,  was  not  one 
varying  the  terms  of  the  sealed  contract  so  as  to  require  it  to  be 
under  seal,  but  rather  an  agreement,  based  upon  a  good  and  valid 
consideration,  to  hold  such  contract  in  abeyance  until  the  expira- 
tion of  the  time  fixed  upon  by  the  new  contract.  It  was  conceded 
upon  the  trial  that  Holcomb  was  in  a  proper  position  to  set  up 
the  new  contract,  provided  such  an  one  was  made. 

But,  in  any  event,  as  suggested  by  the  learned  judge  delivering 
the  opinion  in  the  Supreme  Court,  the  judgment  is  sustainable 
upon  the  equitable  ground  that  the  defendant,  having  a  cause  of 
action,  would  be  allowed  to  set  it  up  to  prevent  circuity  of  action. 
Holberton  having  taken  the  assigmnent,  and  held  it  under  the  con- 
tract as  proved,  and  received  a  consideration  therefor  from  the  de- 
fendant, and  this  action  being  by  his  representative,  it  is  the  same 
as  if  he  were  seeking  to  foreclose  the  mortgage  by  suit,  notwith- 
standing his  agreement.  If  the  defendant  could  have  no  defense 
to  the  foreclosure,  still  his  agreement  with  Holberton  would  give 
him  a  right  of  action  for  the  injury  he  received;  otherwise  he  would 
be  remediless.  In  the  face  of  his  agreement,  Holberton,  or  his 
representative,  ought  not  to  be  allowed  to  foreclose  the  mort- 
gage, and  on  the  principle  of  avoiding  circuity  of  action,  the  law 
will  give  effect  to  such  agreement  as  a  defense  to  the  foreclosure 
suit. 

The  judgment  of  the  Supreme  Court  should  be  affirmed.^ 
All  the  judges  were  for  affirmance,  except  Selden,  J.,  who 
thought  the  agreement  void  under  the  statute  of  frauds,  as  not  to 
be  performed  within  a  year. 

Judgment  affirmed. 

^Concurring  opinion  of  Johnson,  J.,  is  omitted. 


504  EXTENSION  OF   MORTGAGE 

OLMSTEAD  v.   LATIMER 

Court  of  Appeals  of  New  York,  1899 

(158  N.  F.  313) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  second  judicial  department,  entered  October  9, 
1896,  modifying  and,  as  modified,  affirming  a  judgment  entered 
upon  a  decision  of  the  court  on  trial  at  Special  Term, 

In  August,  1878,  one  John  G.  Latimer  executed  his  bond  with  a 
mortgage  on  a  lot  and  building  on  Atlantic  street,  Brooklyn,  to  se- 
cure the  sum  of  $18,000  borrowed  by  him.  The  plaintiff  subse- 
quently acquired  that  bond  and  mortgage.  In  1884  Latimer  died 
intestate,  seised  of  the  mortgaged  premises,  leaving  a  widow  and 
four  brothers  (the  three  defendants  and  one  James  D.  Latimer), 
his  only  heirs  at  law.  Letters  of  administration  were  issued  on  the 
estate  of  John  G.  Latimer,  and  upon  settlement  of  the  estate  it 
appeared  that  the  personal  estate  was  exhausted  by  the  payment 
of  the  debts  and  expenses  of  administration,  leaving  a  deficiency"  in 
the  amount  due  for  administrator's  fees.  The  deceased  left  real 
estate  of  considerable  value,  all  of  which  was,  prior  to  the  com- 
mencement of  this  action,  sold  by  the  three  defendants  Latimer,  as 
heirs  at  law,  for  the  aggregate  sum  of  $57,500,  the  value  of  the 
.widow's  dower  in  which  was  estimated  at  $8,426,  leaving  the  net 
value  of  the  lands  sold  in  the  hands  of  each  of  the  defendants  at 
the  time  of  the  trial  at  $12,268.50,  outside  of  the  mortgaged  prem- 
ises. The  latter  were  conveyed,  during  the  years  1888  and  1889, 
to  Frederick  B.  Latimer  by  bargain  and  sale  deeds,  each  reciting 
the  consideration  of  one  dollar.  After  Frederick  had  acquired 
all  the  interest  of  his  brothers  in  the  mortgaged  premises,  he 
and  the  plaintiff  executed  the  following  agreement  [October  15, 
1891]: 

"We  agree  that  the  time  for  the  payment  of  the  Bond  and 
Mortgage  for  $18,000  on  201  and  203  Atlantic  Avenue,  Brooklyn, 
made  by  John  G.  Latimer  to  the  executors  of  Noah  T.  Pike  and 
recorded  in  the  Register's  office  of  Kings  County  in  Liber  1425  of 
Mortgages,  page  17,  August  24,  1878,  being  the  date  thereof,  shall 
be  and  hereby  is  extended  to  May  1,  1895,  subject  to  the  same 
terms  and  conditions,  including  tax,  insurance  and  interest  clauses, 
as  at  present." 

In  April,  1892,  a  fire  occurred  in  the  buildings  on  the  mortgaged 


OLMSTEAD    V.    LATIMER  505 

premises,  by  which  they  were  partially  injured.  In  an  attempt  to 
restore  the  buildings  they  collapsed  and  became  a  total  loss.  By 
this  accident  the  value  of  the  mortgaged  premises  fell  below  the 
amount  of  the  mortgage.  Thereafter,  the  plaintiff  instituted  this 
action  to  foreclose  the  mortgage  and  hold  the  defendants,  as  heirs 
at  law  of  the  original  bondsman  and  mortgagor,  liable  for  any  de- 
ficiency. The  trial  court  held  the  defendant  Frederick  liable  for 
^5  of  anj^  deficiency,  and  the  other  defendants  not  liable.  From 
this  decree  the  plaintiff  and  the  defendant  Frederick  appealed  to 
the  Appellate  Division,  the  former  seeking  to  hold  all  the  defend- 
ants, the  latter  to  be  relieved  from  liability.  The  court  modified 
the  judgment  by  increasing  the  liability  of  the  defendant  Frederick 
to  one-quarter  of  any  deficiency  that  may  arise  on  the  foreclosure 
sale,  and  in  all  other  respects  affirmed  the  judgment. 

Parker,  Ch.  J.  The  defendants  Latimer,  as  heirs  at  law  of  the 
mortgagor,  were  respectively  liable  under  section  1843  of  the  Code 
for  the  debts  of  the  said  mortgagor  decedent  to  the  extent  of  their 
interest  in  the  real  property  that  descended  to  them  from  him.  The 
premises  covered  by  the  mortgage  were  primarily  liable  to  pa\'  the 
mortgage  debt.  As  there  was  no  personal  estate  the  defendants 
were  secondarily  liable,  and  they  were  properly  made  parties  in  the 
action  of  foreclosure  by  virtue  of  section  1627  of  the  Code,  which 
provides  that  "any  person  who  is  liable  to  the  plaintiff  for  the  pay- 
ment of  the  debt  secured  by  the  mortgage  may  be  made  a  defendant 
in  the  action;  and  if  he  has  appeared,  or  has  been  personally  served 
with  the  summons,  the  final  judgment  may  award  payment  by 
him"  of  any  deficiency.  The  judgment  as  it  comes  to  us  decrees 
that  the  defendant  Frederick  B.  Latimer  shall  pay  one-quarter  of 
the  deficiency,  but  it  has  been  held  that  the  effect  of  the  convey- 
ance of  the  premises  to  the  defendant  Frederick  by  his  brothers  in 
the  years  1888  and  1889,  together  with  the  fact  that  he  informed  the 
plaintiff  of  such  conveyance,  and  thereafter  made  an  agreement  to 
extend  the  time  of  payment  of  the  bond  and  mortgage,  had  the 
legal  effect  of  making  Frederick  the  principal  debtor  and  his  broth- 
ers sureties,  and  hence  that  the  effect  of  the  agreement,  extending 
the  time  of  payment,  operated  to  release  the  sureties  from  all 
liability  to  the  plaintiff  on  account  of  the  indebtedness  evidenced 
by  the  bond.  Assuming,  but  not  deciding,  that  the  effect  of  the 
conveyance,  and  that  which  subsequently  happened,  was  to  change 
the  obligation  of  the  defendants  other  than  Frederick  towards 
the  plaintiff,  from  that  of  principals  to  that  of  sureties,  we  come  to 


506  EXTENSION  OF   MORTGAGE 

the  question  whether  the  agreement  to  extend  the  time  of  payment 
was  invahd  for  want  of  consideration. 

There  are  several  decisions  in  this  court  in  which  the  question 
has  been  considered,  and  they  are  in  harmon}^  with  one  another.  In 
Kellogg  v,  Olmsted,  25  N.  Y.  189,  the  action  was  on  a  promissory 
note  by  the  transferee  of  the  payee.  The  answer  alleged  that  after 
the  note  became  due  it  was  mutually  agreed  between  the  holder 
thereof,  the  payee,  and  the  defendants,  ''that  in  consideration  that 
the  defendants  would  keep  the  principal  sum  of  the  said  note  until 
the  first  day  of  April,  1857,  and  pay  the  same  with  interest  on  that 
day,  he,  the  said  payee,  would  extend  the  time  of  payment  of  the 
principal  of  said  note  until  the  first  day  of  April,  1857;  that  the  said 
defendants  then  and  there  assented  to  such  proposition,  and  then 
and  there  agreed  to  and  with  said  Covil  to  keep  said  principal  sum 
of  said  note  until  the  first  day  of  April,  1857,  and  to  pay  the  same 
with  interest  on  that  day."  On  the  trial  of  the  action  the  referee 
excluded  evidence  offered  by  the  defendants  to  establish  the  defense 
so  specially  set  up,  and  exceptions  were  taken  thereto  that  pre- 
sented the  question  to  this  court.  It  was  held  that  an  agreement 
by  a  creditor  to  postpone  payment  of  a  debt  until  a  future  day  cer- 
tain, without  other  or  further  consideration  than  the  agreement 
of  the  debtor  to  pay  the  debt  with  interest,  is  void  for  want  of  con- 
sideration; the  court  citing,  in  support  of  its  position.  Miller  v.  Hol- 
brook,  1  Wend.  317;  Gibson  v.  Renne,  19  Wend.  390;  Pabodie  v. 
King,  12  John.  426;  Reynolds  v.  Ward,  5  Wend.  501;  Fulton  v. 
Matthews,  15  John.  433. 

A  dissenting  opinion  was  written  by  Judge  Davies,  who  two  or 
three  years  later  wrote  the  principal  opinion  in  Halliday  v.  Har't, 
30  N.  Y.  474.  In  that  case  the  action  was  brought  to  recover 
against  the  maker  and  two  indorsers  on  a  promissory  note.  The 
indorsers  defended  on  the  ground  that  the  plaintiff  had,  for  a  val- 
uable consideration,  and  in  writing,  extended  the  time  of  payment 
for  a  period  of  some  months,  and  claimed  that  the  effect  of  such 
extension  was  to  discharge  the  sureties  from  liability.  The  authori- 
ties bearing  upon  the  question  were  very  carefully  considered,  and 
the  court  decided  that  a  partial  payment  by  the  maker  on  account 
of  an  overdue  note  is  not  a  valid  consideration  for  a  promise  of 
forbearance  as  to  the  residue  so  as  to  discharge  the  indorsers.  A 
concurring  opinion  was  written  by  Judge  Hogeboom,  in  which 
he  says:  "The  sureties  were  not  discharged.  There  was  no  valid 
agreement  for  the  extension  of  the  time  of  payment.  There  was  no 
payment  of  any  sum  which  the  party  paying  was  not  obliged  to 


OLMSTEAD    V.    LATIMER  507 

pay.  The  performance  of  an  unqualified  legal  obligation  by  pay- 
ment of  part  of  a  sum  due  upon  a  note  is  not  a  valid  consideration 
for  the  extension  of  payment  of  the  remainder."  ^ 

In  Parmelee  v.  Thompson,  45  N.  Y.  58,  one  of  the  makers  of  a 
promissory  note  after  maturity  paid  to  the  payee  a  sum  equal  to  the 
amount  due  thereon  and  took  possession  of  the  note.  Subse- 
quently he  brought  suit  against  another  maker,  who  gave  evidence 
tending  to  show  that  while  the  payee  held  the  note  an  action  was 
brought  thereon  in  the  Supreme  Court,  and  that  it  was  agreed 
between  the  defendants  and  the  plaintiff  therein  that  the  suit 
should  be  discontinued,  the  defendant  to  pay  the  costs  and  have 
until  the  ensuing  December  to  pay  the  note;  that  the  costs  were 
paid  and  the  suit  discontinued,  after  which  the  plaintiff  became 
the  owner  of  the  note  and  brought  the  action  before  the  expiration 
of  the  time  agreed  upon,  and  the  trial  judge  held  that  there  was  no 
valid  agreement  to  extend  the  time  of  payment.  The  judgment 
was  affirmed  in  this  court,  the  opinion  being  written  by  Judge 
Allen,  in  which  he  said:  "It  is  competent  for  the  parties,  by  a  parol 
agreement,  to  enlarge  the  time  of  performance  of  a  simple  con- 
tract. .  .  .  But  a  promise  to  extend  the  time  of  payment,  un- 
less founded  on  a  good  consideration,  is  void.  A  payment  of  a  part 
of  the  debt,  or  the  interest  already  accrued,  or  a  promise  to  pay 
interest  for  the  future,  is  not  a  sufficient  consideration  to  support 
such  promise."  (Citing  Miller  v.  Holbrook,  Gibson  v.  Renne  and 
Kellogg  v.  Olmsted,  supra.) 

Our  attention  has  not  been  called  to  any  authority  in  this  court 
in  hostility  to  the  position  taken  in  the  decisions  we  have  referred 
to.  The  reasons  assigned  by  the  learned  justice  who  wrote  for  the 
Appellate  Division,  in  favor  of  overthrowing  the  doctrine  of  these 
cases,  while  presented  with  marked  ability  and  clearness,  are  not 
at  all  new.  They  were  advanced  in  the  dissenting  opinion  by 
Judge  Davies  in  Kellogg  v.  Olmsted,  supra,  the  first  case  in  which 
the  question  received  attention  in  this  court,  so  far  as  we  are  ad- 
vised. Whether  the  reasoning  of  the  prevailing  or  dissenting  opin- 
ion seems  the  better,  it  is  not  profitable  to  inquire,  for  the  ques- 
tion was  settled  by  the  decision  of  this  court,  and  has  by  later 
adjudications  become  so  firmly  grounded  that  it  may  not  now  be 
questioned. 

The  judgment  should  be  reversed  as  to  the  defendants  Henry  A. 
and  Brainard  G.  Latimer,  and  that  of  the  Special  Term  modified 

1  The  discussion  of  Lownian  v.  Silherstein,  108  N.  Y.  169,  has  been 
Yates,  37  N.  Y.  601,  and  Powers  v.      omitted. 


'508  EXTENSION   OF    MORTGAGE 

by  striking  out  the  direction  to  the  referee  to  pay  costs  to  Brainard 
G.  and  Henry  A.  Latimer,  and  so  further  modified  as  to  adjudge 
that  the  defendants,  Frederick  B.  Latimer,  Henry  A.  Latimer  and 
Brainard  G.  Latimer,  each  pay  to  the  plaintiff  one-quarter  of  any 
deficiency  that  may  arise  on  the  sale  of  the  mortgaged  premises 
under  said  judgment,  and  as  thus  modified  affirmed,  with  costs. 
All  concur.^ 

1  But  see,  contra,  Benson  v.  Phipps,  87  Tex.  578  (1895). 


CHAPTER   IV 

ASSIGNMENT   OF  MORTGAGE 

Section  I. — Mode  of  Transfer 

LAWRENCE  v.   KNAP  &   MENZEY 

Supreme  Court  of  Errors  of  Connecticut,  1791 
(1  Root,  248) 

Petition  in  chancery,  shewing  that  Lownsbury  was  indebted  to 
Plat,  for  which  he  gave  his  note  and  a  mortgage  as  collateral  se- 
curity, which  deed  was  recorded.  Plat  was  indebted  to  Hunter,  and 
for  a  valuable  consideration  assigned  said  note  to  him  [and]  at  the 
same  time  delivered  him  said  mortgage-deed.  Hunter  assigned  said 
note  to  the  petitioner  for  a  debt  which  he  owed  him,  and  also  deliv- 
ered to  him  said  mortgage. 

The  petitionees  attached  the  mortgaged  lands  and  had  them  set 
off  to  them  on  executions,  as  Plat's  estate,  in  satisfaction  of  debts 
due  from  Plat  to  them.  The  petitioner  had  recovered  judgment  in 
ejectment  for  said  lands  in  Plat's  name  and  had  taken  possession, 
and  now  prays  that  the  petitionees  may  be  compelled  to  release  to 
him  their  right  and  title  to  said  premises,  or  that  he  be  in  some 
way  quieted  in  his  right  to  said  lands. 

This  cause  was  twice  argued.  The  court  now  granted  the  peti- 
tion and  passed  a  decree  against  Menzey  (Knap  having  deceased 
pending  the  suit)  for  him  to  release  all  his  right  to  said  mortgage 
premises,  upon  the  principle  that  the  petitioner  owned  the  debt 
for  which  said  mortgage  was  given  as  collateral  security — that  he 
who  is  entitled  to  the  debt,  which  is  the  principal  thing,  hath  right 
to  all  the  collateral  securities  given  to  ensure  the  payment  of  the 
debt;  especially  as  in  this  case,  where  the  actual  deliver}'  of  the 
mortgage  accompanied  the  assignment  of  the  note,  of  which  the 
petitionees  had  notice. 

Afterwards  a  petition  was  brought  against  the  heir  of  Knap  and 
a  similar  decree  passed  against  them,  notwithstanding  they  had 

509 


510  ASSIGNMENT   OF   MORTGAGE 

purchased  the  equity  of  redemption  of  Lownsbury,  which  might 
entitle  them  to  redeem,  but  was  no  bar  to  the  petition.^ 


GREEN    V.   HART 

Court  of  Errors  of  New  York,  1806 

(1  Johns.  580) 

Aylmar  Johnson,  on  the  2d  September,  1796,  being  justly  in- 
debted to  WiUiam  Green  in  the  sum  of  $1,551.64,  gave  him  a 
promissory  note  for  that  sum,  payable  to  him,  or  his  order,  at  the 
Bank  of  New  York  on  the  1st  of  May,  1798.  To  secure  the  pay- 
ment of  this  note,  Jonas  Piatt,  who  was  a  trustee  of  Johnson,  exe- 
cuted a  mortgage  of  two  lots  of  land  in  Corley's  Manor,  which  was 
duly  registered. 

In  October,  1796,  Green  endorsed  the  note  to  the  respondent,  and 
delivered  it  to  him,  with  the  mortgage,  which  he  holds.  The  re- 
spondent filed  his  bill  against  the  appellant  and  others,  stating  the 
above  facts,  and  that  he  paid  a  valuable  consideration  for  the  note 
and  mortgage,  and  that,  by  non-payment  of  the  money,  he  was 
seised  of  the  mortgaged  premises;  requiring  an  answer  to  every 
part  of  the  bill,  and  praying  that  the  money  might  be  paid,  or  the 
premises  sold  in  the  usual  manner. 

The  respondent,  on  the  3d  of  March,  1798,  gave  a  receipt  to 
Green  acknowledging  that  he  received  the  note  of  Johnson  as  col- 
lateral security  for  the  pajmient  of  Green's  note  to  him  for 
$1,491.11,  payable  the  3d  of  May,  1798,  and  stating  that  the  note 
of  Johnson  was  secured  by  a  mortgage  which  was  "not  assigned." 

Johnson,  in  his  answer,  insisted  that  the  mortgage  had  not  been 
assigned  to  Green,  who  stated  that  the  sum  really  lent  to  him  by  the 
respondent  was  only  $1,035;  the  residue  of  the  note  being  for 
usurious  interest.  There  was  no  satisfactory  evidence  of  the  usury; 
and  the  chancellor  decreed  a  sale  of  the  mortgaged  premises,  and  an 
account  to  be  taken  of  what  was  due  on  Johnson's  note,  and  di- 
rected the  proceeds  to  be  applied  to  the  payment  of  what  was  due 
and  the  costs.    From  this  decree  Green  appealed  to  this  court. 

The  reasons  for  the  decree  were  assigned  by 

The  Chancellor:^ 

As  to  the  second  point,  whether  the  respondent  acquired  any 
right  to  the  mortgage  in  question  by  the  transfer  of  the  note: 

1  See  Austin  v.  Burbank,  2  Day,  -  A  portion  of  the  opinion,  relating 

474  (1807).  to  the  question  of  usury,  is  omitted. 


GREEN    l\    HART  511 

The  note  given  to  the  appellant  by  Aylmar  Johnson  was  coeva), 
and  part  of  the  same  transaction,  with  the  mortgage  in  question, 
and  the  only  reason  why  the  agency  of  Jonas  Piatt  was  at  all  con- 
nected with  it  appeared  to  have  been  because  he  held  the  mort- 
gaged lands,  which  were  intended  as  collateral  security  for  the 
payment  of  the  debt  due  from  Johnson,  as  his  trustee.  Johnson, 
therefore,  in  every  equitable  point  of  view,  was  both  the  maker  of 
the  note  and  mortgagor,  as  the  mortgage  was  executed,  by  his 
direction  or  procurement,  by  his  trustee,  who  has  disclaimed  all 
other  interest  than  such  as  he  holds  as  trustee,  and  respecting 
whose  interest  the  parties  do  not  differ. 

The  endorsement  of  the  note  by  the  appellant  to  the  respondent 
was  accompanied  by  the  delivery  of  the  mortgage.  If  the  note  was 
satisfied,  it  involved  the  satisfaction  of  the  mortgage,  for  the  exist- 
ence of  the  mortgage,  by  express  reference,  depended  upon  that  of 
the  note.  In  its  essence,  and  by  act  and  operation  of  law,  it  was 
parcel  of  the  same  contract,  executed  at  the  same  time,  directed  to 
the  same  object,  and  to  be  satisfied  by  the  same  means. 

The  doctrine  laid  down  by  Lord  Mansfield  in  the  case  of  Martin, 
ex  dem.  Weston  v.  Mowlin,  2  Burr.  969,  which  was  cited  in  argu- 
ment before  me,  applies  to  this  point  with  much  force.  The  ques- 
tion in  that  case  arose  on  a  bill  between  the  representatives  of  the 
real  and  the  representatives  of  the  personal  estate  of  the  testator. 
In  defining  the  species  of  property  of  a  mortgagor,  Lord  Mans- 
field observed:  "A  mortgage  is  a  charge  upon  the  land,  and  what- 
ever will  give  the  money  will  carry  the  estate  in  the  land  along  with 
it,  to  every  purpose.  The  estate  in  the  land  is  the  same  thing  as 
the  money  due  upon  it.  It  ivill  be  liable  to  debts;  it  will  go  to  ex- 
ecutors; it  will  pass  by  a  will  not  made  and  executed  with  the  solem- 
nities required  by  the  statute  of  frauds.  The  assignment  of  the  debt, 
or  forgiving  it,  will  draw  the  land  after  it,  as  a  consequence;  nay,  it 
would  do  it,  though  the  debt  were  only  forgiven  by  parol;  for  the 
right  of  the  land  would  follow,  notwithstanding  the  statute  of 
frauds."  ^ 

The  receipt  of  Ephraim  Hart  designates  the  mortgage  as  deliv- 
ered, but  not  assigned.  This,  it  appears  to  me,  was  merely  descrip- 
tive of  its  situation  at  the  time  of  its  delivery.  It  had  no  formal 
assignment;  but  if  it  was  intended  not  to  be  assigned,  its  delivery 
to  the  respondent  is  inexplicable,  unless  the  slight  ligament  con- 
necting the  note  with  the  mortgage  is  the  reason,  as  alleged  by  the 

J  See  Judge  Trowbridge's  elabo-  Mansfield's  view,  in  8  Mass.  551 
rate    argument,   controverting  Lord      (1812),  given  in  part,  supra,  p.  12. 


512  ASSIGNMENT   OF   MORTGAGE 

appellant.     But  that  circumstance  would  appear  to  intimate  that 
the  parties  intended  they  should  remain  inseparable. 

I  think,  however,  that  the  transfer  of  the  note,  and  the  delivery 
of  the  mortgage,  are  decisive  on  this  point,  and  that  the  respondent 
took  the  latter  as  a  legal  incident  of  the  transfer  of  the  debt. 

Spencer,  J.,  delivered  the  unanimous  opinion  of  the  court. 

On  the  argument  it  has  been  insisted  by  the  appellant's  counsel, 

2d.  That  it  was  not  Green's  intention  to  transfer  the  rnortgage 
to  Hart;  and  had  it  been  so,  nothing  passed  by  the  mere  delivery, 
as  the  statute  to  prevent  frauds  and  perjuries  requires  a  deed  or 
note  in  writing.^ 

Courts  of  equity  consider  mortgages  according  to  the  essential 
nature  of  contracts,  and  give  them  operation  according  to  the  in- 
tention of  the  parties:  the  debt  is,  consequently,  there  esteemed  the 
principal,  and  the  land  the  incident;  and  whenever  the  debt  is  dis- 
charged, the  interest  of  the  mortgagee  in  the  land  ceases  of  course. 
There  is,  then,  a  manifest  distinction  between  absolute  estates  in 
fee  and  conditional  estates  for  securing  the  payment  of  money. 
Mortgages  are  not  now  considered  as  conveyances  of  lands  within 
the  statute  of  frauds;  and  the  forgiving  the  debt,  with  the  delivery 
of  the  security,  is  holden  to  be  an  extinguishment  of  the  mortgage. 
(Powell,  3d  edit.,  Mort.  54;  Barnard,  90;  Richard  v.  Sims,  2  Burr. 
979.)  If,  however,  a  mortgage  was  within  the  statute,  the  circum- 
stances of  this  case  would  exempt  it  from  its  operation.  In  case  of 
the  pajTnent  of  the  money  secured  b}^  mortgage,  in  equity  a  trust 
arises  for  the  benefit  of  the  mortgagor;  so,  where  the  debt  thus  se- 
cured is  transferred  by  the  mortgagee,  he  becomes  a  trustee  for  the 
benefit  of  the  person  having  an  interest  in  the  debt.  (2  Anstruther, 
438.)  In  the  case  of  Martin  v.  Mowlin,  2  Burr.  979,  Lord  Mans- 
field lays  it  down  as  an  established  principle,  that  the  assignment 
of  the  debt  will  draw  the  land  after  it;  and  I  cannot  agree  that  this 
was  an  obiter  dictum  of  the  judge. 

In  the  present  case  the  mortgage  was  delivered  to  the  assignee  of 
the  debt.  Had  it  not  been  delivered,  nor  anything  said  about  it,  I 
should  have  considered  the  respondent,  on  the  failure  of  Johnson 
to  pay  the  note,  entitled  to  the  aid  of  the  mortgage.  It  was  compe- 
tent to  the  parties  to  agree  that  the  mortgage  should  not  be  resorted 
to  by  the  holder  of  the  note;  but  the  proof  of  such  agreement  lies 
on  the  appellant,  and  it  should  be  explicit.  The  receipt  furnishes 
no  evidence  of  such  agreement;  it  describes  the  real  situation  of  the 

^  Opinion  is  given  on  this  second  point  only. 


WARDEN    V.    ADAMS  513 

mortgage  as  not  assigned.  But  this  expression  falls  far  short  of  an 
agreement  that  it  was  not  to  be  assigned.  It  does  not  appear  that 
the  appellant  had  any  rights  prejudiced  by  the  assignment  of  the 
mortgage;  and  it  is  impossible  to  evade  the  force  of  the  fact  of  his 
depositing  it  in  the  respondent's  hands.  It  speaks  a  language  in- 
capable of  being  misunderstood,  and  is  decisive  of  the  question. 
An  issue  to  investigate  the  intention  of  the  parties,  on  that  act, 
would  have  been  useless.  I  therefore  think  that  the  respondent 
had  an  equitable  interest  in  the  mortgage  equivalent  to  the  amount 
of  the  principal  and  interest  of  his  note  against  Green. 

Judgment  of  affirmance.^ 


WARDEN   V.   ADAMS 

Supreme  Judicial  Court  of  Massachusetts,  1818 

(15  Mass.  233) 

This  was  a  writ  of  entry  by  the  said  Warden,  as  assignee  of  a 
mortgage  made  by  the  said  Adams  to  one  John  Earle. 

The  action  came  on  for  trial  before  the  Chief  Justice  at  the  last 
April  term  in  this  county,  and  the  parties  agreed  that  the  following 
facts  should  be  considered  as  proved  in  the  case,  viz.:  The  said 
Adams  made  and  executed  the  mortgage  deed  declared  on,  condi- 
tioned for  the  payment  of  six  promissory  notes  made  by  the  said 
John  and  one  Lewis  Adams,  payable  to  the  said  Earle  or  his  order. 
Afterwards  the  said  Earle  became  insolvent,  and  from  the  15th  of 
November  to  the  5th  of  December,  1815,  was  in  failing  circum- 
stances. Previously  to  the  assignment  hereafter  mentioned  Earle 
had  pledged  one  of  the  said  notes  to  a  person  not  interested  in  this 
suit,  but  did  not  assign  or  deliver  over  to  him  the  mortgage  deed 
as  security,  and  he  afterwards  redeemed  the  note,  which  he  had 
since  transferred  to  one  Sewall  Hamilton,  but  not  until  after  the 
execution  of  the  assignment  to  Warden.  On  the  20th  of  November, 
1815,  he  deposited  with  a  scrivener  two  of  said  notes,  and  also  the 
mortgage  deed,  for  the  purpose  of  having  an  assignment  thereof 
made  to  Warden  to  secure  a  debt  due  from  Earle  to  him. 

On  the  27th  of  the  same  November,  Earle  endorsed  one  of  the 
said  six  notes  to  said  Hamilton,  as  part  security  for  a  debt  due  him 

^  Southerin  v.  Mendum,  5  N.  H.  5  Cal.  515  (1855),  accord.  See,  also, 
420  (1831);  Whitlemore  v.  Gibhs,  24  Jackson  v.  Bronson,  19  Johns.  325 
N.   H.   484   (1852);  Ord  v.    M'Kee,      (1822). 


514  ASSIGNMENT    OF    MORTGAGE 

from  Earle.  and  at  the  same  time  assigned  said  mortgage  deed  and 
the  premises  therein  mentioned  to  Hamilton,  by  his  deed  duly  ac- 
knowledged and  recorded  on  the  same  da}':  the  said  assignment 
being  made  on  a  separate  piece  of  paper,  and  referring  to  the  mort- 
gage. 

On  the  28th  of  said  November,  the  said  Earle  executed  an  assign- 
ment of  said  mortgage  deed,  on  the  back  thereof,  to  said  Warden, 
as  security  for  his  said  debt  to  him  and  of  some  debts  due  from 
Earle  to  certain  other  persons,  which  Warden  was  to  assume.  This 
assignment  was  not  acknowledged  or  recorded.  The  mortgage  deed 
and  the  two  notes,  left  with  the  scrivener  for  the  purpose  of  having 
an  assigmnent  made,  remained  in  the  scrivener's  hands  until  the 
actual  execution  of  the  said  assignment  to  Warden.  Hamilton  re- 
covered judgment  for  possession  of  the  mortgaged  premises  against 
Adams,  and  possession  was  delivered  to  him  by  the  proper  officer: 
and  Adams  afterwards  entered  and  continued  in  possession  by  a 
parol  lease  from  the  assignee  of  Hamilton. 

The  demandant  offered  to  prove,  by  the  testimony  of  Earle, 
that  when  he  made  tHe  assignment  to  Hamilton,  and  prior  to  that 
time,  Hamilton  knew  that  the  original  mortgage  deed  was  in  the 
hands  of  the  scrivener,  for  the  purpose  of  an  assignment  being 
made  to  the  demandant,  for  securing  the  payment  of  the  two  notes 
transferred  to  him  as  aforesaid. 

But  the  Chief  Justice,  being  of  opinion  that  the  demandant 
could  not  maintain  his  action,  in  consequence  of  the  prior  assign- 
ment to  Hamilton,  under  which  the  tenant  is  in  possession,  and 
also  that  Earle  was  not  a  competent  witness  to  prove  the  fact  for 
which  he  was  offered,  if  such  fact  were  material,  directed  a  nonsuit, 
which  was  to  be  set  aside  and  a  new  trial  granted,  if  upon  the  above 
facts,  together  with  the  said  knowledge  of  Hamilton,  this  action 
could  be  maintained. 

Burnside  and  Bangs,  for  the  demandant. — The  delivery  of  the 
mortgage  deed,  together  with  the  notes  endorsed,  for  the  purpose 
specified,  amounted  to  such  an  equitable  assignment  as  the  law 
will  protect.  It  is  said  by  Lord  Mansfield  in  the  case  of  Martin  v. 
Mowlin,  2  Burr,  979,  that  "a  mortgage  is  a  charge  upon  the  land: 
and  whatever  would  give  the  money  will  carry  the  estate  along 
with  it,  to  every  purpose.  The  estate  in  the  land  is  the  same 
thing  as  the  money  due  upon  it."  "The  assignment  of  the  debt^ 
or  forgiving  it,  will  draw  the  land  after  it,  as  a  consequence;  nay, 
it  would  do  it  though  the  debt  were  forgiven  only  by  parol;  for 
the  right  to  the  land  would  follow,  notwithstanding  the  statute  of 


WARDEN    V.    ADAMS  515 

frauds."  This  doctrine  is  recognized  and  confirmed  by  the  Su- 
preme Court  of  New  York  in  the  case  of  Green  v.  Hart,  1  Johns. 
580;  see  also  Powell  on  Mortgages,  186  to  190;  11  Mass.  Rep".  475. 
Then  the  second  assignment  by  Earle  to  Hamilton,  with  the  knowl- 
edge of  the  latter  of  the  prior  transaction,  was  fraudulent  and 
void  as  to  the  demandant.  And  if  we  should  be  debarred  from 
fixing  this  knowledge  upon  him,  we  contend  that  he  must  be  pre- 
sumed, from  the  facts  found  in  the  case,  to  have  known  of  the 
delivery  of  the  deed  to  the  scrivener,  and  the  purpose  of  such  de- 
livery. The  absence  of  the  mortgage  deed  should  have  put  Hamil- 
ton on  his  guard;  and  he  is  chargeable  with  fraudulent  motives 
in  taking  an  assignment  under  such  circumstances.  It  can  make 
no  difference  that  but  two  of  the  six  notes  were  endorsed  to  the 
demandant.  The  mortgage  was  given  as  security  for  these  two 
notes,  and  might  legally  and  equitably  be  assigned  with  them. 

Newton  for  the  tenant. — The  assignment  to  Hamilton  was  prior 
to  that  to  the  demandant,  and  being  in  every  circumstance  con- 
formed to  the  requisitions  of  the  statute,  must  have  the  preference. 
The  assignment  of  a  mortgage  is  a  conveyance  of  the  rents  and 
profits.  (11  Mass.  Rep.  474,  Goodwin  v.  Richardson,  Ad7n.)  Then 
the  assignee  has  such  an  interest  in  the  land  as  cannot  pass  with- 
out writing. 

The  dictum  of  Lord  Mansfield  in  the  case  of  Martin  v.  Mowlin 
has  been  completely  put  down  by  Judge  Trowbridge  in  his  tract 
upon  rnortgages  (8  Mass.  Rep.  557,  and  seq.);  and  it  may  well  be 
presumed  that  if  the  judges,  who  agreed  in  the  decision  in  the  case 
of  Gree7i  v.  Hart,  had  read  that  tract,  they  would  not  have  given 
the  opinion  they  did.  That  decision  was,  however,  in  chancery, 
and  is  no  precedent  for  the  government  of  this  court. 

By  the  Court.  By  force  of  our  statutes  regulating  the  transfer 
of  real  estates  and  for  preventing  frauds,  no  interest  passes  by  a 
mere  delivery  of  a  mortgage  deed  without  an  assignment  in  writ- 
ing and  by  deed. 

An  assignment,  made  by  a  separate  deed,  without  the  delivery 
over  of  the  original  mortgage  deed,  conveys  all  the  interest  of  the 
mortgagee,  and  makes  the  grantee  the  assignee  of  the  mortgage. 

The  knowledge  imputed  in  this  case  to  Hamilton,  the  assignee, 
of  an  intention  on  the  part  of  Earle,  the  mortgagee,  to  assign  the 
mortgage  to  the  demandant,  does  not  impair  the  tenant's  title:  he 
being  a  bo7id  fide  creditor,  and  having  a  right,  by  his  vigilance,  to 
secure  his  demands  in  this  way:  just  as  he  would  have  had  by  an 
attachment,  although  he  might  know  that  another  creditor  in- 


516  ASSIGNMENT   OF    MORTGAGE 

tended  to  make  an  attachment,  and  had  taken  incipient  measures 
therefor. 

The  nonsuit  is  not  set  aside. ^ 


BARRETT  v.  HINCKLEY 

Supreme  Court  of  Illinois,  1888 

(124  III.  32) 

Mr.  Justice  Mulkey  delivered  the  opinion  of  the  Court : 

Watson  S.  Hinckley,  claiming  to  be  the  owner  in  fee  of  the  land 
in  controversy,  on  the  26th  day  of  February,  1885,  brought  an 
action  of  ejectment,  in  the  Superior  Court  of  Cook  County,  against 
the  appellants,  George  D.  Barrett,  Adalina  S.  Barrett,  William  H. 
Whitehead,  and  others,  to  recover  the  possession  thereof.  There 
was  a  trial  of  the  cause  before  the  court,  without  a  jury,  resulting 
in  a  finding  and  judgment  for  the  plaintiff,  and  the  defendants  ap- 
pealed. 

The  evidence  tends  to  show  the  following  state  of  facts:  In  1870 
Thomas  Kearns  was  in  possession  of  the  land,  claiming  to  own  it 
in  fee  simple.  On  August  3  of  that  year  he  sold  and  conveyed  it 
to  William  H.  W.  C ashman  for  the  sum  of  $80,000.  Cushman 
gave  his  four  notes  to  Kearns  for  the  balance  of  the  purchase 
money, — one  for  $12,500,  maturing  in  thirty  days;  three  for 
$16,875  each,  maturing,  respectively,  in  two,  three  and  four  years 
after  date,  and  all  secured  by  a  mortgage  on  the  premises.  The 
notes  seem  to  have  all  been  paid  but  the  last  one.  In  1878  Kearns 
died,  and  his  widow,  Alice  Kearns,  administered  on  his  estate. 
Previous  to  his  death,  however,  he  had  hypothecated  the  mortgage 
and  last  note  to  secure  a  loan  from  Greenebaum.  Subsequently, 
and  before  the  commencement  of  the  present  suit,  Greenebaum, 
in  his  own  right,  and  Mrs.  Kearns,  as  administratrix  of  her  hus- 
band, for  value,  sold  and  assigned,  by  a  separate  instrument  in 
writing,  the  mortgage  and  note  to  the  appellee,  Watson  S.  Hinckley. 

This  is,  in  substance,  the  case  made  by  plaintiff.  The  defend- 
ants showed  no  title  in  themselves  or  any  one  else.  The  conclusion 
to  be  reached,  therefore,  depends  upon  whether  the  case  made  by 

^  Smith  V.  Kelley,  27  Me.  237  2  Biss.  (111.)  351  (1870);  W^i^wms  v. 
(1847);  Adams  v.  Parker,  12  Gray  Teachey,  85  N.  C.  402  (1881),  ac- 
(Mass.)  53  (1858);  Cntlrell  v.  Adams,        cord. 


BARRETT   V.    HINCKLEY  517 

the  plaintiff  warranted  the  court  below  in  rendering  the  judgment 
it  did. 

It  is  claimed  by  appellants,  in  the  first  place,  that  much  of  the 
evidence  relied  on  by  appellee  to  sustain  the  judgment  below  was 
improperly  admitted  by  the  court,  and  various  errors  have  been 
assiiiiied  upon  the  record  questioning  the  correctness  of  the  rulings 
of  the  court  in  this  respect.  They,  however,  go  further,  and  in.sist 
that,  even  conceding  the  facts  to  be  as  claimed  by  appellee  himself, 
they  are  not  sufficient  in  law  to  sustain  the  action.  As  the  judg- 
ment below  will  have  to  be  reversed  on  the  groimd  last  suggested, 
it  will  not  be  necessary  to  consider  the  other  errors  assigned. 

We  propose  to  state,  as  briefly  as  may  be,  some  of  the  reasons 
which  have  led  us  to  the  conclusion  reached.  In  doing  so,  it  is 
perhaps  proper  to  call  attention  at  the  outset  to  some  considera- 
tions that  should  be  steadily  kept  in  mind  as  we  proceed,  and  to 
which  we  attach  not  a  little  importance. 

It  is  first  to  be  specially  noted,  that  this  is  a  suit  at  law,  as  con- 
tradistinguished from  a  suit  in  equity.  It  is  brought  to  enforce 
a  naked  legal  right,  as  distinguished  from  an  equitable  right.  The 
plaintiff  seeks  to  recover  certain  lands,  the  title  whereof  he  claims 
in  fee  simple.  To  do  this,  he  is  bound  to  show  in  himself  a  fee 
simple  title  at  law,  as  contradistinguished  from  an  equitable  fee. 
{Fischer  v.  Eslaman,  68  111.  78;  Wales  v.  Bogue,  31  id.  464;  Flem- 
ing v.  Carter^  70  id.  286;  Dawson  v.  Hayden,  67  id.  52.)  Has  he 
done  this?  He  attempts  to  derive  title  remotely  through  the 
mortgage  from  Cushman  to  Kearns,  but  upon  what  legal  theory 
is  not  very  readily  perceived.  His  immediate  source  of  title,  how- 
ever, seems  to  be  Mrs.  Kearns,  as  administratrix  of  her  husband, 
and  Greenebaum,  as  pledgee  of  the  note  and  mortgage.  The  in- 
strument through  which  he  claims  is  lost  or  destroyed,  and  all  we 
know  concerning  its  character  is  what  the  plaintiff  himself  sa3's 
al)out  it.  As  to  its  contents,  he  does  not  pretend  to  state  a  single 
sentence  or  word  in  it,  but  characterizes  it  as  an  assignment,  and 
gives  the  conclusions  which  he  draws  from  it  in  general  terms 
only.  After  stating  his  purchase  of  the  note  and  mortgage  in 
January,  1880,  he  says:  "The  assignment  was  from  Mrs.  Kearns, 
the  administratrix  of  Thomas  Kearns'  estate,  and  Elias  Greene- 
baum, the  banker.  At  the  time  of  the  purchase  a  separate  writing 
was  given  to  me, — a  full  assignment.  ...  It  was  a  verj'  explicit 
assignment,  or  full  assignment  of  the  note  and  mortgage  and  the 
land,  the  property,  and  all  the  right  and  title  to  the  land."  It  will 
be  observed,  the  instrument  is  throughout  characterized  as  an  as- 


518  ASSIGNMENT    OF   MORTGAGE 

signment  only,  which  does  not,  hke  the  term  "deed,"  or  "spe- 
cialty," signify  an  instrument  under  seal.  A  mere  written  assign- 
ment, founded  upon  a  valuable  consideration,  is  just  as  available 
for  the  purpose  of  passing  to  the  assignee  the  equitable  title  to  land 
as  an  instrument  under  seal.  Such  being  the  case,  we  would  clearly 
not  be  warranted  in  inferring  that  the  assignment  was  under  seal 
from  the  simple  fact  that  the  witness  gives  it  as  his  opinion  that 
the  instrument  was  "a  full  assignment"  of  the  land,  which  is  noth- 
ing more  than  the  witness'  opinion  upon  a  question  of  law.  There 
not  being  sufficient  evidence  in  the  record  to  show  that  the  assign- 
ment was  under  seal,  it  follows  that  even  conceding  the  legal  title 
to  the  property  to  have  been  in  Mrs.  Kearns  and  Greenebaum,  or 
either  of  them,  it  could  not  have  passed  to  the  appellee  by  that  in- 
strument, and  if  not  by  it,  not  at  all,  because  that  is  the  only 
muniment  of  title  relied  on  for  that  purpose.  This  conclusion  is, 
of  course,  based  upon  the  fundamental  principle  that  an  instru- 
ment inter  'partes,  in  order  to  pass  the  legal  title  to  real  property, 
must  be  under  seal. 

But  this  is  not  all.  Even  conceding  the  sufficiency  of  the  as- 
signment to  pass  the  legal  title,  the  record,  in  our  opinion,  fails  to 
show  that  the  assignors,  or  either  of  them,  had  such  title;  hence, 
there  was  nothing  for  the  assignment  to  operate  upon,  so  far  as 
the  legal  estate  in  the  land  is  concerned.  Having  no  such  title, 
they  could  not  convey  it.  Nemo  plus  juris  ad  alium  transferre 
potest  quam  ipse  hahet.  That  the  legal  estate  in  this  property  was 
not  either  in  Greenebaum  or  Mrs.  Kearns  at  the  time  of  the  as- 
signment to  plaintiff,  is  demonstrable  by  the  plainest  principles 
of  law.  Let  us  see.  Thomas  Kearns  was  the  owner  of  this  prop- 
erty in  fee.  He  conveyed  it  in  fee  to  Cushman.  The  latter,  as  a 
part  of  the  same  transaction,  reconveyed  it,  by  way  of  mortgage, 
to  Kearns.  By  reason  of  this  last  conveyance,  Kearns  became 
mortgagee  of  the  property,  and  Cushman  mortgagor.  According 
to  the  English  doctrine,  and  that  of  some  of  the  States  of  the 
Union,  including  our  own,  Kearns,  at  least  as  between  the  parties, 
took  the  legal  estate,  and  Cushman  the  equitable.  According  to 
other  authorities,  Kearns,  by  virtue  of  Cushman's  mortgage  to 
him,  took  merely  a  lien  upon  the  property  to  secure  the  mortgage 
indebtedness,  and  the  legal  title  remained  in  Cushman.  For  the 
purposes  of  the  present  inquiry  it  is  not  important  to  consider  just 
now,  if  at  all,  which  is  the  better  or  true  theory.  It  is  manifest, 
and  must  be  conceded,  that  the  legal  estate  in  the  land,  after  the 
execution  of  the  mortgage,  was  either  in  the  mortgagee  or  mort- 


BARRETT   V.    HINCKLEY  519 

gagor,  or  in  both  combined.  Such  being  the  case,  it  is  equally 
clear,  appellee,  to  succeed,  must  have  deduced  title  through  one 
or  both  of  these  parties.  This  could  only  have  been  done  by  show- 
ing that  the  legal  title  had,  by  means  of  some  of  the  legally  recog- 
nized modes  of  conveying  real  property,  passed  from  one  or  both 
of  them  to  himself.  This  he  did  not  do  or  attempt  to  do.  Indeed, 
he  does  not  claim  through  them,  nor  either  of  them.  Not  only  so, 
neither  Mrs.  Kearns  nor  Greenebaum,  through  whom  appellee 
does  claim,  derives  title  through  any  deed  or  conveyance  executed 
by  either  the  mortgagor  or  mortgagee.  Nor  does  either  of  them 
claim  as  heir  or  devisee  of  the  mortgagor  or  mortgagee. 

As  the  assignment  of  the  note  and  mortgage  to  appellee  did  not, 
as  we  hold,  transfer  or  otherwise  affect  the  legal  title  to  the  land, 
it  may  be  asked,  what  effect,  then,  did  it  have?  This  question, 
like  most  others  pertaining  to  the  law  of  mortgages,  admits  of  two 
answers,  depending  upon  whether  the  rules  and  principles  which 
prevail  in  courts  of  equity,  or  of  law,  are  to  be  applied.  If  the  lat- 
ter, we  would  say  none;  because,  as  to  the  note,  that  could  not  be 
assigned  by  a  separate  instrument,  as  was  done  in  this  case,  so  as 
to  pass  the  legal  title.  {Ryan  v.  Maij,  14  111.  49;  Fortier  v.  Darst, 
31  id.  213;  Chickering  v.  Raymond,  15  id.  362.)  As  to  the  mort- 
gage, it  is  well  settled  that  could  not  be  assigned,  like  negotiable 
paper,  so  as  to  pass  the  legal  title  in  the  instrument  or  clothe  the 
assignee  with  the  immunity  of  an  innocent  holder,  except  under 
certain  circumstances,  which  do  not  apply  here.  {Chicago,  Dan- 
ville and  Vincennes  Railway  Co.  v.  Loewenthal,  93  111.  433;  Hamil- 
ton County  V.  Liibukee,  51  id.  415;  Olds  v.  Cummings,  31  id.  188; 
Mclntyre  v.  Yates,  104  id.  491;  Fortier  v.  Darst,  31  id.  213.)  But 
that  the  mortgagee,  or  any  one  succeeding  to  his  title,  might,  by 
deed  in  the  form  of  an  assignment,  pass  to  the  assignee  the  legal 
as  well  as  the  equitable  interest  of  the  mortgagee,  we  have  no 
doubt,  though  there  is  some  conflict  on  this  subject.  (2  Wash- 
burn on  Real  Prop.,  p.  115,  and  authorities  there  cited.)  Yet 
the  assignors  in  the  case  in  hand,  not  having  the  legal  title,  as  we 
have  just  seen,  could  not,  by  any  form  of  instrument,  transmit 
it  to  another.  If,  however,  the  rules  and  principles  which  obtain 
in  courts  of  equity  are  to  be  applied,  we  would  say  that  by  virtue 
of  the  assignment  the  appellee  became  the  equitable  owner  of  the 
note  and  mortgage,  and  that  it  gave  him  such  an  interest  or  equity 
respecting  the  land  as  entitled  him  to  have  it  sold  in  satisfaction 
of  the  debt. 

There  is,  perhaps,  no  species  of  ownership  known  to  the  law 


520  ASSIGNMENT   OF   MO  It  Tw  AGE 

which  is  more  complex,  or  which  has  given  rise  to  more  diversity 
of  opinion,  and  even  conflict  in  decisions,  than  that  which  has 
sprung  from  the  mortgage  of  real  property.  By  the  common  law, 
if  the  mortgagor  paid  the  money  at  the  time  specified  in  the  mort- 
gage, the  estate  of  the  mortgagee,  by  reason  of  the  performance 
of  the  condition  therein,  at  once  determined  and  was  forever 
gone,  and  the  mortgagor,  by  mere  operation  of  law,  was  remitted 
to  his  former  estate.  On  the  other  hand,  if  the  mortgagor  failed 
to  pay  on  the  day  named,  the  title  of  the  mortgagee  became  ab- 
solute, and  the  mortgagor  ceased  to  have  any  interest  whatever 
in  the  mortgaged  premises.  By  the  execution  of  the  mortgage, 
the  entire  legal  estate  passed  to  the  mortgagee,  and  unless  it  was 
expressly  provided  that  the  mortgagor  should  retain  possession 
till  default  in  payment,  the  mortgagee  might  maintain  ejectment 
as  well  before  as  after  default.  This  is  the  view  taken  by  the 
common  law  courts  of  England,  and  which  has  obtained,  with. 
certain  limitations,  in  most  of  the  States  of  the  Union,  including 
our  own,  in  w-hich  the  common  law  system  prevails. 

In  Carroll  v.  Ballance,  26  111.  9,  which  was  ejectment  by  the 
mortgagee  against  the  assignee  of  the  mortgagor  to  recover  the 
mortgaged  premises,  this  court  thus  states  the  English  rule  on  the 
subject:  "In  England,  and  in  many  of  the  American  States,  it  is 
understood  that  the  ordinary  mortgage  deed  conveys  the  fee  in 
the  land  to  the  mortgagee,  and  under  it  he  may  oust  the  mortgagor 
immediately  on  the  execution  and  delivery  of  the  mortgage,  with- 
out waiting  for  the  period  fixed  for  the  performance  of  the  condi- 
tion,— citing  Coote  on  Mortgages,  339;  Blaney  v.  Bearce,  2  Greenlf. 
132;  Brown  v.  Cramer,  1  N.  H.  169;  Hobart  v.  Sanborn,  13  id.  226; 
Northampton  Paper  Mills  v.  Ames,  8  Mete.  1.  And  this  right  is 
fully  recognized  by  courts  of  equity,  although  liable  to  be  de- 
feated at  any  moment  in  those  courts  by  the  payment  of  the  debt.'* 
Again,  in  Nelson  v.  Pinegar,  30  111.  481,  which  was  a  bill  by  a  mort- 
gagee to  restrain  waste,  it  is  said:  "The  complainant,  as  mort- 
gagee of  the  land,  was  the  owner  in  fee,  as  against  the  mortgagor 
and  all  claiming  under  him.  He  had  the  jus  in  re  as  well  as  ad 
rem,  and  being  so,  is  entitled  to  all  the  rights  and  remedies  which 
the  law  gives  to  such  an  owner."  So,  in  Oldham  v.  Pfleger,  84  IlL 
102,  which  was  ejectment  by  the  heirs  of  the  mortgagor  against 
the  grantee  of  the  mortgagor,  this  court,  in  holding  the  action 
could  not  be  maintained,  said:  "Under  the  rulings  of  this  court, 
the  mortgagee  is  held,  as  in  England,  in  law,  the  owner  of  the  fee, 
having  the  jus  in  re  as  well  as  the  jus  ad  rem."     In  Finlon  v. 


BARRETT    I'.    HINCKLEY  521 

Clark,  118  111.  32,  the  same  doctrine  is  announced,  and  the  cases 
above  cited  are  referred  to  with  approval.  {Taylor  v.  Adams,  115 
111.  574.) 

,  (Jourts  of  equity,  however,  from  a  very  early  period,  took  a 
widely  different  view  of  the  niatter.  They  looked  upon  the  for- 
feiture of  the  estate  at  law  because  of  non-payment  on  the  very  day 
fixed  by  the  mortgage  as  in  the  nature  of  a  penalty,  and,  as  in  other 
cases  of  penalties,  gave  relief  accordingly.  This  was  done  by  al- 
lowing the  mortgagor  to  i-edeem  the  land,  on  equitable  terms,  at 
any  time  before  the  right  to  do  so  was  barred  by  foreclosure.  The 
right  to  thus  redeem  after  the  estate  had  become  absolute  at  law 
in  the  mortgagee  was  called  the  "equity  of  redemption,"  and  has 
continued  to  be  so  called  to  the  present  time.  These  courts,  look- 
ing at  the  substance  of  the  transaction  rather  than  its  form,  and 
with  a  view  of  giving  effect  to  the  real  intentions  of  the  parties, 
held  that  the  mortgage  was  a  mere  security  for  the  payment  of 
the  debt;  that  the  mortgagor  was  the  real  beneficial  owner  of  the 
land,  subject  to  the  incumbrance  of  the  mortgage;  that  the  in- 
terest of  the  mortgagee  was  simply  a  lien  and  incumbrance  upon 
the  land,  rather  than  an  estate  in  it.  In  short,  the  positions  of 
mortgagor  and  mortgagee  were  substantially  reversed  in  the  view 
taken  by  courts  of  equity.  These  two  systems  grew  up  side  by 
side,  and  were  maintained  for  centuries  without  conflict,  or  even 
friction,  between  the  law  and  equity  tribunals  by  which  they  were 
respectively  administered.  The  equity  courts  did  not  attempt 
to  control  the  law  courts,  or  even  question  the  legal  doctrines 
which  they  announced.  On  the  contrary,  their  force  and  validity 
were  often  recognized  in  the  relief  granted.  Thus,  equity  courts, 
in  allowing  a  redemption  after  a  forfeiture  of  the  legal  estate,  uni- 
fonnly  required  the  mortgagee  to  reconvey  to  the  mortgagor, 
which  was,  of  course,  necessary,  to  make  his  title  available  in  a 
court  of  law. 

In  maintaining  these  two  systems  and  theories  in  England, 
there  was  none  of  that  confusion  and  conflict  which  we  encounter 
in  the  decisions  of  the  courts  of  this  country,  resulting  chiefly  from 
a  failure  to  keep  in  mind  the  distinction  between  courts  of  law  and 
of  equity,  and  the  i-ul(;s  and  princdples  applicable  to  them,  respec- 
tively. The  courts  there,  by  observing  these  things,  kept  the  two 
systems  intact,  and  in  this  conclition  they  were  transplanted  to 
this  country,  and  became  a  part  of  our  own  system  of  laws.  But 
other  causes  have  contributed  to  destroy  that  certainty  and  uni- 
formity which  formerly  prevailed  with  us.     Chiefly  among  these 


522  ASSIGNMENT   OF    MORTGAGE 

causes  may  be  mentioned  the  statutory  changes  in  the  law  in 
many  of  the  States,  and  the  failure  of  the  courts  and  authors  to 
note  those  changes  in  their  expositions  of  the  law  of  such  States. 
Perhaps  another  fruitful  source  of  confusion  on  this  subject  is  the  » 
fact  that  in  many  of  the  States  the  common  law  forms  of  action 
have  been  abolished  by  statute,  and  instead  of  them  a  single  statu- 
tory form  of  action  has  been  adopted,  in  which  legal  and  equitable 
rights  are  administered  at  the  same  time  and  by  the  same  tribunal. 
Yet  the  distinction  between  legal  and  equitable  rights  is  still  pre- 
served, so  that  although  the  action,  in  theory,  is  one  at  law,  it  is 
nevertheless  subject  to  be  defeated  by  a  purely  equitable  defence. 
Under  the  influence  of  these  statutory  enactments  and  radical 
changes  in  legal  procedure,  by  which  legal  and  equitable  rights  are 
given  effect  and  enforced  in  the  same  suit,  the  equitable  theory  of 
a  mortgage  has,  in  many  of  these  States,  entirely  superseded  the 
legal  one.  Thus,  in  New  York  it  is  said,  in  the  case  of  Trustees 
of  Union  College  v.  Wheeler  et  al,  61  N.  Y.  88,  that  "a  mortgage  ' 
is  a  mere  chose  in  action.  It  gives  no  legal  estate  in  the  land,  but 
is  simply  a  lien  thereon,  the  mortgagor  remaining  both  the  legal 
and  equitable  owner  of  the  fee."  Following  this  doctrine  to  its 
logical  results,  it  is  held  by  the  courts  of  that  State  that  ejectment 
under  the  code  will  not  lie,  at  the  suit  of  the  mortgagee,  against 
the  owner  of  the  equity  of  redemption.  {Murray  v.  Walker,  31 
N.  Y.  399.)  In  strict  conformity  with  the  theory  that  the  mort- 
gagee has  no  estate  in  the  land,  but  a  mere  lien  as  security  for  his 
debt,  the  courts  of  New  York,  and  others  taking  the  same  view, 
hold  that  a  conveyance  by  the  mortgagee,  before  foreclosure,  with- 
out an  assignment  of  the  debt  is,  in  law,  a  nullity.  {Jackson  v. 
Curtis,  19  Johns.  325;  Wilson  v.  Trowp,  2  Cow.  231;  Jackson  v. 
Willard,  4  Johns.  41.)  ^  And  this  court  seems  to  have  recognized 
the  same  rule  as  obtaining  in  this  State,  in  Delano  v.  Bennett,  90 
111.  533. 

The  New  York  cases  just  cited,  and  all  others  taking  the  same 
view,  are  clearly  inconsistent  with  the  whole  current  of  our  de- 
■cisions  on  the  subject,  as  is  abundantly  shown  by  the  authorities 
:already  cited.    The  doctrme  would  seem  to  be  fundamental,  that 

'"■  1  In  the  Jackson  case,    19  Johns.  mortgage  is  deemed  a  mere  incident 

(N.  Y.)  325  (1822),  the  court  said:  to  the  bond  or  personal  security  for 

"It  is  now  well  settled,  that  the  mort-  the  debt;  and  the  assignment  of  the 

gagee  has  a  mere   chattel   interest;  interest  of  the  mortgagee  in  the  land, 

and  the  mortgagor  is  considered  as  without  an  assignment  of  the  debt, 

the  proprietor  of  the  freehold.     The  is  considered  in  law  as  a  nullity." 


BARRETT   V.    HINCKLEY  523 

if  one  sui  juris,  having  the  legal  title  to  land,  intentionally  delivers 
to  another  a  deed  therefor  containing  apt  words  of  conveyance,  the 
title,  at  law,  at  least,  will  pass  to  the  grantee;  but  for  what  purposes 
or  uses  the  grantee  will  hold  it,  or  to  what  extent  he  will  be  able 
to  enforce  it,  will  depend  upon  circumstances.  If  the  mortgagee 
conveys  the  land  without  assigning  the  debt  to  the  grantee,  the 
latter  would  hold  the  legal  title  as  trustee  for  the  holder  of  the 
mortgage  debt.  {Sanger  v.  Bancroft,  12  Gray,  367;  Barnard  v. 
Eaton,  2  Cush.  304;  Jackson  v.  WiUard,  4  Johns.  41.)  It  is  true, 
the  interest  which  passes  is  of  no  appreciable  value  to  the  grantee. 
Thus,  in  the  case  last  cited.  Chancellor  Kent,  in  speaking  of  it, 
says:  "The  mortgage  interest,  as  distinct  from  the  debt,  is  not  a 
fit  subject  of  assignment.  It  has  no  determinate  value.  If  it 
should  be  assigned,  the  assignee  must  hold  the  interest  at  the  will 
and  disposal  of  the  creditor  who  holds  the  bond."  In  4  Wait's  Ac- 
tions and  Defences,  page  565,  the  rule  is  thus  stated:  ''By  the  com- 
mon law,  a  mortgagee  in  fee  of  land  is  considered  as  absolutely 
entitled  to  the  estate,  which  he  may  devise  or  transmit  by  descent 
to  his  heirs."  In  conformity  with  this  view,  Pomeroy,  in  his  work 
on  Equity  Jurisprudence  (vol,  3,  page  150),  in  treating  of  this  sub- 
ject, says:  "In  law,  the  mortgagee  may  convey  the  land  itself  by 
deed,  or  devise  it  by  will,  and  on  his  death,  intestate,  it  will  de- 
scend to  his  heirs.  In  equity,  his  interest  is  a  mere  thing  in  action, 
assignable  as  such,  and  a  deed  by  him  would  operate  merely  as  an 
assignment  of  the  mortgage;  and  in  administering  the  estate  of  a 
deceased  mortgagee,  a  court  of  equity  treats  the  mortgage  as  per- 
sonal assets,  to  be  dealt  with  by  the  executor  or  administrator." 

We  have  already  seen,  that  under  the  decisions  of  this  court,  and 
by  the  general  current  of  authority,  a  mortgage  is  not  assignable  at 
law  by  mere  indorsement,  as  in  the  case  of  commercial  paper;  but, 
on  the  other  hand,  the  estate  and  interest  of  the  mortgagee  may  be 
conveyed  to  the  holder  of  the  indebtedness,  or  even  to  a  third  party, 
by  deed,  with  apt  words  of  conveyance,  and  the  fact  that  it  is,  in 
form,  an  assignment,  will  make  no  difference.  (2  Washburn  on 
Real  Prop.  115,  116.)  Such  an  assignee,  if  owner  of  the  mortgage 
indebtedness,  might,  no  doubt,  maintain  ejectment  in  his  own 
name,  for  his  own  use;  or  the  action  might  be  brought  in  his  name, 
for  the  use  of  a  third  party  owning  the  indebtedness.  {Kilgour  v. 
Gockley,  83  111.  109.)  So  in  this  case,  if  the  action  had  been  brought 
in  the  name  of  Kearns'  heirs,  for  the  use  of  Hinckley,  no  reason  is 
perceived  why  the  action  might  not  be  maintained. 

It  must  not  be  concluded,  from  what  we  have  said,  that  the  dual 


524  ASSIGNMENT    OF    MORTGACxE 

system  respecting  mortgages,  as  above  explained,  exists  in  this 
State  precisely  as  it  did  in  England  prior  to  its  adoption  in  this 
country,  for  such  is  not  the  case.    It  is  a  conceded  fact,  that  the 
equitable  theory  of  a  mortgage  has,  in  process  of  time,  made  in  this 
State,  as  in  others,  material  encroachments  upon  the  legal  theory, 
which  is  now  fully  recognized  in  courts  of  law.    Thus,  it  is  now 
the  settled  law  that  the  mortgagor  or  his  assignee  is  the  legal 
owner  of  the  mortgaged  estate,  as  against  all  persons  except  the 
mortgagee  or  his  assigns.    (Hall  v.  Lance,  25  111.  250,  277;  E7nory  v. 
Keighan,  88  id.  482.)    As  a  result  of  this  doctrine,  it  follows  that  in 
ejectment  by  the  mortgagor,  against  a  third  party,  the  defendant 
cannot  defeat  the  action  by  showing  an  outstanding  title  in  the 
mortgagee.     {Hall  v.  Lance,  supra.)     So,  too,  courts  of  law  now 
regard  the  title  of  a  mortgagee  in  fee,  in  the  nature  of  a  base  or 
determinable  fee.    The  term  of  its  existence  is  measured  by  that 
of  the  mortgage  debt.     When  the  latter  is  paid  off,  or  l)ecomes 
barred  by  the  Statute  of  Limitations,  the  mortgagee's  title  is  extin- 
guished by  operation  of  law.    (Pollock  v.  Maison,  41  111.  516;  Har- 
ris V.  Mills,  28  id.  44;  Gibson  v.  Rees,  50  id.  383.)    Hence  the  rule 
is  as  well  established  at  law  as  it  is  in  equity,  that  the  debt  is  the 
principal  thing,  and  the  mortgage  an  incident.    So,  also,  while  it 
is  indispensable  in  all  cases  to  a  recovery  in  ejectment,  that  the 
plaintiff  show  in  himself  the  legal  title  to  the  property,  as  set  forth 
in  the  declaration,  except  where  the  defendant  is  estopped  from 
denying  it,  yet  it  does  not  follow  that  because  one  has  such  title, 
he  may,  under  all  circumstances,  maintain  the  action, — and  this 
is  particularly  so  in  respect  to  a  mortgage  title.    Such  title  exists 
for  the  benefit  of  the  holder  of  the  mortgage  indebtedness,  and  it 
can  only  be  enforced  by  an  action  in  furtherance  of  his  interests, — 
that  is,  as  a  means  of  coercing  payment.    If  the  mortgagee,  there- 
fore, should,  for  a  valuable  consideration,  assign  the  mortgage  in- 
debtedness to  a  third  party,  and  the  latter,  after  default  in  pay- 
ment, should  take  possession  of  the  mortgaged  premises,  ejectment 
would  not  lie  against  him  at  the  suit  of  the  mortgagee,  although  the 
legal  title  would  be  in  the  latter,  for  the  reason  it  would  not  be  in 
the  interest  of  the  owner  of  the  indebtedness.    In  short,  it  is  a  well 
settled  principle,  that  one  having  a  mere  naked  legal  title  to  land  in 
which  he  has  no  beneficial  interest,  and  in  respect  to  which  he  has 
no  duty  to  perform,  cannot  maintain  ejectment  against  the  equi- 
table owner,  or  any  one  having  an  equitable  interest  therein  with  a 
present  right  of  possession.    This  case,  with  a  slight  change  of  the 
circumstances,  would  afford  an  excellent  illustration  of  the  prin- 


BARRETT   V.    HINCKLEY  525 

(•ij)le.  Suppose  the  present  plaintiff  had  obtained  possession  under 
his  equitable  title  to  the  note  and  mortgage,  and  the  heirs  of  Kearns, 
who  hold  the  legal  title,  had  brought  ejectment  against  him,  the 
action  clearly  could  not  have  been  maintained,  for  the  reasons  we 
have  just  stated.  But  it  does  not  follow,  because  such  an  action 
would  not  lie  against  him,  that  he  could,  upon  a  mere  equitable 
title,  maintain  the  action  against  others.  {Cottrell  v.  Adams,  2  Biss. 
351;  9  Myers'  Fed.  Dec.  240.)  The  question  in  that  case  was 
almost  identical  with  the  question  in  this,  and  the  court  reached 
the  same  conclusion  we  have.  See,  also,  Syeer  v.  Hadduck,  31  111. 
439. 

For  the  reasons  stated,  the  judgment  of  the  court  below  is  re- 
versed, and  the  cause  remanded  for  further  proceedings  not  incon- 
sistent with  this  opinion.^ 

Judgment  reversed. 

^See,  Torrey  v.  Deavitt,  53  Vt.  331       (1881);   Jordayi   v.    Cheney,    74    Me. 

359  (1883). 


CHAPTER   IV   (continued) 
Section  II. -^Effect  of  Transfer 

MATTHEWS   v.   WALLWYN 

High  Court  of  Chancery,  1798 

(4  Ves.  118) 

The  cause  was  heard  upon  bill  and  answer.  When  it  was  first 
opened,  the  Lord  Chancellor  directed  it  to  stand  over,  that  it  might 
be  formally  argued ;  considering  the  point  to  be  new,  and  of  great 
importance,  as  it  might  affect  the  general  credit  of  mortgages. 

Lord  Chancellor  [Loughborough]:  In  this  cause  the  ques- 
tion was  only  whether  the  assignee  of  a  mortgage  had  a  right  to 
be  paid  according  to  the  sum  that  appeared  due  upon  the  mortgage 
deed,  whatever  might  be  the  state  of  the  account  between  the 
mortgagor  and  mortgagee.  The  circumstances  had  nothing  in 
them  so  particular  as  to  vary  at  all  the  general  question,  Matthews 
had  created  a  mortgage,  upon  which  Shepheard  had  advanced 
money;  and,  Shepheard  being  his  attorney,  the  purpose  of  creating 
the  mortgage  was  that  money  might  be  raised  for  the  use  of  Mat- 
thews. Shepheard  ought  not  to  have  made  any  use  of  the  mortgage 
but  for  the  purpose  for  which  it  was  created,  viz.,  to  raise  money 
for  Matthews;  but  he  thought  fit  to  assign  the  mortgage  without 
the  privity  of  the  mortgagor,  and  the  assignee  now  claims  to  hold 
the  mortgage  to  the  full  extent  of  the  sum  appearing  due  upon  the 
face  of  the  deed. 

When  the  cause  came  on  before  me,  a  case  was  referred  to  in 
which,  it  was  supposed,  Lord  Thurlow  had  entertained  an  idea, 
but  not  decided,  that  a  mortgagor  having  permitted  the  mortgage 
deed  without  any  indorsement  upon  it  to  be  in  the  possession  of 
the  mortgagee,  an  assignee  taking  from  that  mortgagee  might 
have  a  right  to  hold  that  mortgage  to  the  full  extent  of  it  against 
the  mortgagor  who  permitted  the  mortgagee  to  deal  with  and  to 
make  a  security  upon  it.  It  was  also  supposed  that  in  practice 
there  is  no  occasion  to  make  the  mortgagor  a  party;  and  in  some 
cases  it  may  not  be  possible  to  make  him  a  party  to  the  assignment; 
526 


MATTHEWS    V.    WALLWYN  527 

and  that  to  hold  that  the  assignee  of  a  mortgage  is  bound  to  settle 
the  accounts  of  the  person  from  whom  he  takes  the  assignment, 
would  tend  to  embarrass  transfers  of  mortgages.  I  have  got  all 
the  information  I  could,  and  I  think  I  have  got  the  best.  The 
result  is  that  persons  most  conversant  in  conveyancing  hold  it 
extremely  unfit  and  very  rash,  and  a  very  indifferent  security,  to 
take  an  assignment  of  a  mortgage  without  the  privity  of  the  mort- 
gagor as  to  the  sum  really  due;  that  in  fact  it  does  happen  that 
assignments  of  mortgages  are  taken  without  calling  upon  the 
mortgagor;  but  that  the  most  usual  case  where  that  occurs  is  where 
it  is  the  best  security  that  can  be  got  for  a  debt  not  otherwise  well 
secured,  and  it  is  not  in  the  course  of  transferring  mortgages,  but 
of  raising  money  upon  such  securities;  but  no  conveyancer  of  es- 
tablished practice  would  recommend  it  as  a  good  title  to  take  an 
assignment  of  a  mortgage  without  making  the  mortgagor  a  party 
and  being  satisfied  that  the  money  was  really  due. 

With  regard  to  the  case  that  was  quoted,  I  believe  that  from 
the  circumstances  of  the  first  order  that  was  made,  there  might 
have  been  some  doubt  expressed  at  the  time  upon  the  point.  The 
bill  was  filed  by  Lunn  and  others,  assignees  of  Lodge,  a  bankrupt, 
against  St.  John.  According  to  the  state  of  the  case  I  have  had, 
Lodge  made  a  mortgage  to  Pitman,  who,  being  indebted  to  St. 
John,  made  an  assignment  to  him  for  a  sum  less  in  fact  than  the 
sum  due  upon  the  mortgage.  It  was  stamped  and  signed,  but  not 
sealed.  Lodge  and  Pitman  both  became  bankrupts.  The  bill  was 
filed,  insisting  that  nothing  was  due  upon  the  account  between 
their  estates.  The  defendant  St.  John  insisted  that  the  plaintiffs 
must  redeem  him,  who  was  a  fair  mortgagee,  and  had  nothing  to 
do  with  the  account.  Lord  Thurlow  in  the  decree  gave  special  di- 
rections to  the  Master  to  inquire  what  was  due  at  the  time  of  the 
mortgage,  what  was  due  at  the  time  of  the  assignment,  and  what 
remained  due — saving  the  point,  how  far  St.  John  would  be  af- 
fected, till  after  the  report  upon  that  special  direction.  It  came 
on  upon  the  report  before  the  Lords  Commissioners,  the  Master 
having  reported  that  Pitman  was  indebted  to  Lodge  in  7000?.  By 
the  order  made  upon  that  report  it  was  declared  that  the  assign- 
ments, dated  the  13th  of  February,  1755,  and  May,  1776,  made  by 
Pitman  to  the  defendants  St.  John  and  Muilman  are  to  be  deemed 
null  and  void  against  the  estate  of  Lodge,  the  bankrupt,  and  are 
to  be  delivered  up  by  the  defendants  St.  John  and  Muilman  to  the 
plaintiff,  the  surviving  assignee  of  Lodge,  to  be  cancelled ;  that  all 
deeds  and  writings  relating  to  the  estate  of  Lodge  be  delivered  up  upon 


528  ASSIGNMENT   OF   MORTGAGE 

oath;  and  that  the  defendants  join  in  reconveying  the  estate.  The 
final  result  therefore  was  that,  nothing  being  due  upon  the  original 
mortgage,  the  two  assignees  of  it  took  no  benefit  by  the  assignments. 
Therefore  that  case  is  a  direct  authority  in  favor  of  Matthews. 

The  cases  decided,  and  long  decided,  in  Precedents  in  Chancery 
and  Vernon,  seem  also  to  bear  very  much  upon  it;  where  it  was 
made  a  question,  now  perfectly  settled,  that,  as  between  the  mort- 
gagee and  the  persons  claiming  under  him,  without  the  privity  of 
the  mortgagor  they  cannot  add  to  what  is  due,  settle  the  account, 
or  turn  interest  into  principal.  The  mortgagee  having  been  in 
possession,  the  assignee  is  bound  to  settle  the  account  of  the  rents 
and  profits  received  by  the  mortgagee,  from  whom  he  takes  the  as- 
signment. Considering  the  general  principles  upon  which  this 
Court  acts  with  regard  to  mortgages,  I  have  no  difficulty  in  de- 
ciding the  point.  It  is  true  there  is  a  legal  estate  or  term;  but  it 
must  be  apparent  upon  the  face  of  the  title  that  it  is  not  an  abso- 
lute conveyance  of  the  term  or  legal  estate,  but  as  a  security  for  a 
debt;  and  the  real  transaction  is  an  assignment  of  a  debt  from 
A.  to  B. — that  debt  collaterally  secured  by  a  charge  upon  a  real 
estate.  The  debt  therefore  is  the  principal  thing;  and  it  is  obvious 
that  if  an  action  was  brought  upon  the  bond  in  the  name  of  the 
mortgagee,  as  it  must  be,  the  mortgagor  shall  pay  no  more  than 
what  is  really  due  upon  the  bond;  if  an  action  of  covenant  was 
brought  by  the  covenantee,  the  account  must  be  settled  in  that 
action.  In  this  court  the  condition  of  the  assignee  cannot  be  better 
than  it  would  be  at  law  in  any  mode  he  could  take  to  recover  what 
was  due  upon  the  assignment. 

Therefore  the  plaintiff  must  be  at  liberty  to  redeem  upon  pay- 
ment of  what  the  Master  shall  find  due  upon  the  original  mortgage 
from  him  to  Shepheard.  I  will  direct  the  account  exactly  in  the 
same  way  as  Lord  Thurlow  made  the  direction  in  the  case  I  have 
cited:  an  account  of  what  was  due  at  the  time  of  the  mortgage, 
what  was  due  at  the  time  of  the  assigrmient,  and  what  remains  due.  ^ 

'''It  is  settled  that,  if  an  assign-  Rosslyn's    decision    upon    that    sub- 

ment  of  a  mortgage  is  taken  without  ject." — Per  Lord  Eldon  in  Chambers 

the  intervention  of   the  mortgagor,  v.  Goldwin,  9  Ves.  254,  264  (1804). 

whatever  the  assignee  pays  he  can  The  reference  is  to  the  decision  of 

claim  nothing  under  the  assignment  Lord    Loughborough     (subsequently 

but  what  is  actually  due  between  the  created  Lord  Rosslyn)  in  the  principal 

mortgagor    and    mortgagee;    and    I  case. 

think  that  rightly  settled.     I  would  And  see.   Turner  v.  Smith,   [1901] 

not  say  so,  but  that  I  know  Lord  1  Ch.  Div.  213. 
Kenyon  entertained  a  doubt  of  Lord 


PARKER   V.    CLARKE  529 

PARKER  V.  CLARKE 
Chancery — The  Rolls  Court,  1861 

(30  Beav.  54) 

William  Gray  Cruchley  was,  under  the  will  of  his  father,  en- 
titled to  a  share  of  his  real  and  personal  estate. 

By  an  indenture  dated  the  5th  of  July,  1849,  William  Georj^e 
Cruchley  conveyed  and  assigned  to  Mr.  Thomas  all  his  estate  and 
interest  under  the  will  for  securing  951.  This  mortgage  was  exe- 
cuted while  William  George  Cruchley  was  in  prison  for  debt,  and 
the  Court,  after  weighing  the  evidence,  came  to  the  conclusion 
that  it  was  given  without  consideration  and  under  a  promise  to 
release  the  mortgagor  from  prison,  which  was  never  performed. 

On  the  12th  July,  1849,  Thomas  transferred  this  mortgage  to 
the  defendant  Clarke,  who  had  notice  of  the  circumstances  under 
which  it  had  been  obtained,  and  in  July,  1860,  Clarke  deposited 
the  mortgage  and  transfer  with  Phillips  to  secure  the  payment  of 
moneys  due  and  to  become  due.  Phillips  had  no  notice  of  the  cir- 
cumstances under  which  the  mortgage  had  been  obtained. 

This  bill  was  filed  against  Clarke  and  Phillips  for  a  declaration 
that  the  mortgage  deed  was  void,  and  for  an  order  for  its  delivery 
up  to  be  cancelled. 

Mr.  FoUett  and  Mr.  Ellis,  for  the  plaintiff,  contended  that  the 
deed  was  void,  and  that  Phillips,  having  a  mere  equitable  title  to 
what  might  be  due  on  the  mortgage,  could  only  claim  such  interest 
as  Clarke  was  entitled  to. 

Mr.  Bagshawe  and  Mr.  J.  Napier  Higgins,  for  Clarke,  contended 
that  the  evidence  failed  in  shewing  that  no  consideration  had  been 
given  for  the  mortgage. 

Mr.  Lloyd  and  Mr.  Locock  Wehh,  for  Phillips,  argued  that  he 
w'as  a  purchaser  for  valuable  consideration  without  notice,  and 
that  he  was  entitled  to  hold  the  deed  until  he  had  been  paid  what 
was  due  to  him;  that  the  mortgagor,  having  enabled  Clarke  to 
ol)tain  money  on  the  faith  of  this  deed,  could  not  set  it  aside  with- 
out paying  what  had  been  actually  advanced  on  it  by  Phillips. 

The  Master  of  the  Rolls  [Sir  John  Romilly]  : 
I  am  of  opinion  in  this  case,  that  the  deed  must  be  delivered  up. 
The  first  question  to  be  considered  is  whether  the  deed  is  not  void, 
being  a  mortgage  deed  for  which  no  consideration  was  given,  and 


530  ASSIGNMENT   OF   MORTGAGE 

having  been  obtained  from  a  person  in  prison,  under  promises  to 
release  him,  which  were  never  reahzed. 

This,  I  am  of  opinion,  is  the  state  of  the  case: — [His  Honor  here 
examined  the  evidence  and  proceeded :] — The  result  is  that  in  my 
opinion  it  is  proved  that  no  consideration  was  given  for  the 
mortgage  deed  and,  as  against  Clarke,  it  must  be  delivered  up  to 
be  cancelled. 

With  respect  to  Phillips,  I  am  of  opinion  he  could  only  take 
what  Clarke  could  give  him,  and  that  he  cannot  stand  in  a  better 
situation  than  Clarke  himself.  Phillips  must  therefore  deliver  up 
the  deeds,  and  his  only  remedy  will  be  against  Clarke. 


,       WEBB  V.  COMMISSIONERS  OF  HERNE  BAY 
Court  of  Queen's  Bench,  1870 
(L.  R.  5  Q.  B.  642)  ^ 

An  action  commenced  by  writ,  with  an  indorsement  that  the 
plaintiffs  intended  to  claim  a  writ  of  mandamus  to  command  the 
defendants  to  apply  all  the  money  raised  or  to  be  raised  under  or 
by  virtue  of  3  and  4  Wm.  IV.,  c.  55,  in  the  manner  prescribed  by 
s.  123  of  that  act.  At  the  trial  a  verdict  was  taken  for  the  plain- 
tiffs, subject  to  a  case. 

The  defendants  are  a  body  corporate,  incorporated  by  the  said 
act  for  the  purpose  of  local  improvement,  and  empowered  by  the 
act  to  levy  rates  and  to  borrow  money  at  interest,  mortgaging  the 
rates  and  issuing  debentures  for  that  purpose.  The  form  of  the 
debentures  was  prescribed  by  the  act,  which  also  made  them 
capable  of  assignment  in  the  form  provided.  Further,  the  commis- 
sioners were  declared  incapable  of  taking  or  entering  into  any  bar- 
gain or  contract  under  the  act,  and  a  penalty  was  prescribed  for  so 
doing.  In  1835  the  defendants  bought  large  quantities  of  bricks 
of  David  Halket,  one  of  the  commissioners,  who  was  a  brick  and 
tile  manufacturer,  and  in  payment  therefor  issued  to  him  certain 
mortgage  securities  of  £100  each,  in  the  form  prescribed  by  the 
act,  and  which  were  duly  registered.  The  mortgages  were  in  the 
form  of  grants  of  the  rates  levied  by  the  commissioners  to  David 
Halket,  his  executors,  administrators  and  assigns.  No  money  was 
actually  paid  by  Halket  to  the  commissioners.  The  mortgages  so 
granted  to  him  were  duly  transferred  to  the  testator  of  the  plain- 

'  A  short  statement  of  facts  is  substituted  for  that  given  in  the  report. 


WEBB    V.    COMMISSIONERS   OF   HERNE   BAY  531 

tiffs,  who  had  no  notice  of  the  circumstances  under  which  they 
were  issued.  No  part  of  the  principal  or  interest  of  the  mortgage 
debt  has  ever  been  paid.  Section  123  of  the  act  above  referred  to 
authorizes  the  commissioners  to  apply  the  money  to  be  raised  by 
them  in  discharging  such  interest  and  principal. 
The  questions  for  the  opinion  of  the  Court  were : — 
1st.  Whether  the  plaintiffs  are  entitled  to  recover  in  this  action 
any  and,  if  so,  what  sum  as  damages  in  respect  of  arrears  of  in- 
terest on  the  six  mortgages  or  any  of  them. 

2nd.  Whether  the  plaintiffs  are  entitled  to  a  writ  of  mandamus 
in  the  form  endorsed  on  the  writ. 

CocKBURN,  C.  J.  By  3  &  4  Wm.  4  c.  cv.  a  local  Act,  which  pro- 
vided for  the  paving,  cleansing,  lighting,  and  improving  the  town 
of  Heme  Bay,  certain  commissioners  are  appointed:  and  by 
s.  119  the  commissioners  have  power  to  mortgage  the  rates  which 
they  are  empowered  to  levy  under  the  Act  for  the  purposes  which 
they  as  such  commissioners  are  to  execute;  and  the  present  plain- 
tiffs sue  upon  certain  debentures  which  were  issued  by  the  commis- 
sioners under  that  section ;  and  they  also  claim  a  writ  of  mandamus 
requiring  the  commissioners  to  apply  the  money  raised  or  to  be 
raised  under  the  Act  to  the  purposes  of  the  Act.  In  order  to  con- 
struct certain  buildings  necessary  for  the  purposes  of  the  Act, 
the  commissioners  required  a  quantity  of  bricks,  and  Halket,  to 
whom  the  debentures  were  originally  given,  supplied  the  bricks  in 
question,  and  instead  of  being  paid  in  cash  he  was  paid  by  deben- 
tures. It  is  said  that  the  transaction  in  respect  of  which  the  de- 
bentures were  issued  was  illegal  under  s.  10  of  the  local  Act,  inas- 
much as  by  that  section  an}^  person  acting  as  a  commissioner  is 
prohibited  from  entering  into  any  contract  with  the  commissioners; 
and  that,  therefore,  the  sale  of  the  bricks  by  Halket  to  the  com- 
missioners, he  himself  being  a  commissioner,  was  an  illegal  trans- 
action. It  may  be  that  the  effect  of  this  section  was  to  render  the 
transaction  illegal  as  regards  the  contract  between  the  commis- 
sioners and  Halket.  But  as  the  commissioners  have  had  the  bene- 
fit of  the  contract,  the  question  would  be  whether  or  not  Halket 
could  recover  in  indebitatus  assumpsit  for  goods  sold.  I  do  not 
think  it  necessary  to  decide  that  question.  I  proceed  entirely 
upon  the  ground  that  the  defendants  are  estopped  from  disputing 
the  validity  of  the  debentures  in  question.  It  is  true  the  commis- 
sioners have  power  under  s.  119  only  to  borrow  money,  and  it  may 
be  that  under  the  power  to  borrow  they  were  not  authorized  to 


532  ASSIGNMENT   OF    MORTGAGE 

give  debentures  for  the  purpose  of  paying  for  goods  and  materials 
supplied  to  them  for  the  purposes  of  the  town.  But  the  commis- 
sioners gave  to  Halket,  in  respect  of  the  bricks  which  they  got  from 
him,  debentures,  in  the  form  prescribed  by  the  Act,  which  purport 
upon  the  face  of  them  to  be  debentures  given  for  money  advanced 
to  them.  Halket,  to  whom  the  debentures  were  originally  given, 
has  parted  with  them  for  a  valuable  consideration  to  the  testator 
of  the  present  plaintiffs,  who  are  in  the  position  of  assignees  of  the 
original  holder,  and  we  must  take  it  as  a  fact  that  the  assignees 
were  perfectly  ignorant  of  any  illegality  in  the  original  transaction 
either  as  regards  Halket  being  a  commissioner,  and  therefore  pro- 
hil)ited  from  entering  into  such  a  contract  with  the  commissioners, 
or  as  to  the  fact  of  their  being  debentures  given  for  goods  supplied  . 
instead  of  for  money  advanced.  Under  those  circumstances,  it  is 
clear  the  principle  laid  down  in  Pickard  v.  Seais,  6  A.  &  E.  469, 
and  Freeman  v.  Cooke,  2  Ex.  654,  is  immediately  applicable  to  the 
present  case,  as  well  also  as  the  doctrine  laid  down  in  the  judgment 
of  this  Court  in  the  case  to  which  my  Brother  Blackburn  referred,^ 
Re  Bahia  and  San  Francisco  Ry.  Co.,  L.  R.  3  Q.  B.  584.  In  that 
case  a  railway  company  had  been  deceived  into  registering  shares 
and  granting  certificates  of  registration,  whereby  innocent  persons 
were  induced  to  purchase  those  shares  under  the  belief  that  the 
vendors  were  registered  shareholders,  and  it  was  held  that  the  com- 
pany were  estopped  by  their  own  act  from  denying  the  right  of 
the  innocent  transferees  of  the  shares  to  be  registered  as  share- 
holders. I  think  the  principle  of  all  those  cases  is  strictly  appli- 
cable to  this.  How  is  a  person  who  takes  for  a  valuable  considera- 
tion such  debentures  as  these  upon  an  assignment,  regular  in  form, 
to  know  under  what  circumstances  they  were  issued?  The  com- 
missioners might  be  wrong  in  allowing  these  debentures  to  go  forth, 
knowing  that  they  might  come  into  the  hands  of  an  innocent 
holder  for  value,  but  according  to  the  principle  of  the  cases  cited, 
they  are  estopped  from  alleging  that  the  debentures  were  illegally 
issued.  The  debentures  on  their  face  import  a  legal  consideration, 
namely,  the  advance  of  money.  The  defendants  issued  the  de- 
bentures with  the  knowledge  that  they  were  capable  of  being  trans- 
ferred, and  would  very  likely  be  transferred  to  a  holder  for  value; 
how  can  it  lie  in  their  mouths  to  say  that  the  transaction  in  respect 
of  which  they  gave  these  debentures  was  illegal?  I  think  on  the 
sound  principle  of  the  doctrine  laid  down  in  the  cases  which  I 
have  cited,  such  a  defence  cannot  be  made  available. 

1  Upon  the  argument,  the  report  of  which  is  omitted  here. 


BICKERTON    V.    WALKER  533 

I  confess  I  cannot  see  any  difficulty  in  the  other  points  made, 
namely,  that  the  first  purpose  to  which  moneys  raised  by  the  com- 
missioners is  to  be  applied  is  that  of  paying  the  costs  and  charges 
of  getting  the  Act.  It  is  true  these  expenses  have  been  met  partly 
by  debentures  which  are  still  unpaid ;  but  that  is  no  answer  to  an 
application  for  payment  on  the  part  of  the  present  holder  of  these 
debentures. 

It  was  further  contended  that  the  mandamus  claimed  by  the 
plaintiffs  will  not  lie,  because  it  is  possible  that  rates  may  not 
hereafter  be  raised,  and  the  form  of  the  mandamus  ought  to  have 
been  to  levy  rates  out  of  which  to  pay  the  interest  on  the  debentures ; 
but  it  appears  that  up  to  the  present  time  rates  have  from  time  to 
time  been  levied,  and  if  the  rates  be  levied,  inasmuch  as  the  com- 
missipners  are  bound  under  the  Act  to  pay  interest  upon  the  de- 
bentures which  they  have  issued,  the  mandamus  will  operate  and 
compel  paj^ment  of  the  amounts  claimed  in  this  action.  If,  owing 
to  the  form  which  this  mandamus  assumes,  the  commissioners 
desist  from  levying  the  rates,  the  consequence  will  be  that  a  further 
mandamus  will  be  required,  commanding  the  commissioners  to 
lev3'  a  rate  for  the  express  purpose  of  paying  the  interest;  but  I 
think  we  are  fairly  entitled  to  presume  that  that  which  has  been 
done,  and  which  is  a  part  of  the  duty  of  the  commissioners  to  do 
under  the  provisions  of  the  Act,  will  continue  to  be  done.^ 

Judgment  for  the  plaintiffs. 


BICKERTON   v.   WALKER 

Supreme  Court  of  Judicature — Chancery  Division,  1885 

(L.  R.  31  Ch.  D.  151) 

Elizabeth  Goulston,  who  died  in  1862,  bequeathed  to  trustees 
a  sum  of  £1000  upon  trust  to  invest  it  and  pay  the  income  to 
Ehzabeth  Bickerton,  the  wife  of  John  Bickerton,  for  life,  and  after 
her  death  upon  trust  for  such  children  of  hers  as  should  be  living 
at  her  decease,  and  being  sons  should  attain  twenty-one,  or  being 
daughters  should  attain  that  age  or  marry,  and  for  such  issue  of 
any  children  dying  in  Mrs.  Bickerton's  lifetime  as  should  be  living 
at  Mrs.  Bickerton's  death,  such  children  to  take  their  parent's 
share.  The  legacy  was  invested  in  £975  New  £3  per  Cent.  Annu- 
ities. 

'  Concurring  opinions  of  Blackburn,  Mellor  and  Lush,  JJ.,  omitted. 


534  ASSIGNMENT   OF   MORTGAGE 

In  1879  Mrs.  Bickerton  was  a  widow  with  three  children,  all  of 
whom  liad  attained  twenty-one.  Emily  Bickerton,  spinster  (here- 
inafter called  Miss  Bickerton),  was  one  of  them. 

On  the  10th  of  February,  1879,  Mrs.  and  Miss  Bickerton  exe- 
cuted a  mortgage  deed  by  which,  in  consideration  of  the  sum  of 
£250  therein  expressed  to  be  paid  to  them  by  Ebenezer  Bates,  "  the 
receipt  and  payment  of  which  said  sum  of  £250  they,  the  said  E. 
Bickerton  and  E.  Bickerton  the  younger,  do  hereby  acknowledge, 
and  from  the  same  and  every  part  thereof  do  hereby  release  the 
said  E.  Bates,  his  executors,  administrators,  and  assigns,"  they 
jointly  and  severally  covenanted  with  Bates  for  the  payment  to 
him  of  £250  with  interest  at  £7  per  cent,  on  the  10th  of  August 
then  next.  Mrs.  Bickerton  then  assigned  to  Bates  her  life  interest 
in  the  £975  stock  and  a  policy  of  assurance  for  £100  effected  by 
her  on  her  own  life,  and  Miss  Bickerton  assigned  to  Bates  her 
reversionary  share  in  the  £975  stock  and  a  policy  of  assurance  for 
£300  effected  by  her  on  her  own  life,  subject,  as  regards  all  the  in- 
terests assigned,  to  redemption  on  payment  of  £250  with  interest 
at  £7  per  cent,  on  the  10th  of  August  then  next.  Indorsed  on  the 
deed  was  a  receipt  in  the  usual  form,  signed  by  Mrs.  and  Miss 
Bickerton,  acknowledging  the  receipt  of  £250. 

Astley  acted  as  solicitor  for  both  parties  in  this  transaction,  and 
the  deed  was  left  in  his  hands.  On  the  11th  of  March,  1879,  the 
mortgage  was  transferred  by  Bates  to  Hunter,  who  acted  by  his 
own  solicitor,  Walker,  and  gave  full  value  for  the  mortgage  as  a 
mortgage  for  £250,  without  making  any  inquiry  from  the  mort- 
gagors. 

This  action  was  commenced  by  Mrs.  and  Miss  Bickerton  against 
Walker,  Bates,  Astley,  and  Hunter,  alleging  that  the  plaintiffs  had 
only  received  sums  amounting  to  £91  17s.  Qd.  instead,  of  £250, 
that  Bates  was  the  nominee  and  trustee  of  and  for  Walker,  and 
that  Bates  and  Astley  acted  under  his  directions,  and  that  Hunter 
had  notice  of  the  above  facts  when  he  took  his  transfer.  The 
plaintiffs  asked  that  the  mortgage  might  be  cancelled,  they  offering 
to  pay  the  sum  really  advanced  and  the  interest  thereon,  and  that 
the  transfer  might  be  declared  void  against  the  plaintiffs,  or  in  the 
alternative  that  the  mortgage  might  stand  as  a  security  for  what 
had  been  really  advanced  and  interest,  and  that  the  plaintiffs 
might  have  redemption  on  that  footing,  or  as  another  alternative, 
that  they  might  have  redemption  on  the  mortgage  deed  as  it  stood. 

It  was  clearly  shewn  that  Walker  was  not  interested  in  the 
mortgage,  and  had  simply  acted  as  Hunter's  solicitor,  and  no 


,  BICKERTON    V.    WALKER  535 

ground  was  shewn  for  affecting  either  of  them  with  notice  that 
the  plaintiffs  had  not  received  the  whole  £250.  Vice-Chancellor 
Bacon  considered  the  plaintiff's  case  not  to  be  proved,  and  gave  a 
judgment  dismissing  the  action  with  costs  as  against  Walker,  and 
dismissing  it  with  costs  as  against  Hunter,  except  so  far  as  it  sought 
the  ordinary  judgment  for  redemption.  The  usual  order  in  a  re- 
demption suit  was  made  against  Hunter,  with  a  direction  that  the 
account  was  to  be  taken  on  the  footing  of  £250  having  been  ad- 
vanced to  the  plaintiffs. 

The  plaintiffs  appealed,  and  the  appeal  was  heard  on  the  16th 
and  17th  of  November,  1885.  The  evidence  as  to  the  circum- 
stances under  which  the  mortgage  was  executed  was  gone  into,  and 
in  the  opinion  of  the  Court  of  Appeal  was  such  as  would,  if  there 
had  been  no  transfer,  have  made  it  proper  to  decree  redemption 
on  payment  only  of  what  should  be  shewn  to  have  been  actually 
advanced.  Astley  was  abroad  and  Bates  did  not  appear,  so  the 
material  question  was  whether  a  decree  of  that  nature  could  be 
made  against  Hunter. 

Seward  Brice,  for  the  appellants: — I  contend  that  a  mortgage 
can  only  be  enforced  by  a  transferee  to  the  same  extent  as  it  might 
be  enforced  by  the  original  mortgagee.  {Parker  v.  Clarke,  30 
Beav.  54.)  The  transferee  takes  subject  to  the  equities  which 
affect  the  original  mortgagee.    (Norrish  v.  Marshall,  5  Madd.  475.) 

[Pry,  L.  J.: — That  case  only  deals  with  subsequent  transactions 
between  the  mortgagor  and  mortgagee,  the  mortgagor  not  know- 
ing of  the  transfer.] 

The  principle  is  illustrated  by  Matthews  v.  Wallwyn,  4  Ves.  118, 
which  decides  that  a  transferee  takes  subject  to  the  account  be- 
tween the  mortgagor  and  mortgagee.  The  principal  thing  in  the 
transaction  is  the  assignment  of  the  debt,  as  said  by  Lord  Eldon  in 
that  case.  The  debt,  until  the  recent  change  in  the  law,  was  only 
assignable  in  equity;  the •  assignment  is  subject  therefore  to  equi- 
table principles,  and  passes  nothing  but  what  is  justly  due  on  the 
instrument.  Williams  v.  Sorrell,  4  Ves.  389,  follows  the  same 
principle.  The  true  view  is  that  the  transferee  is  bound  by  all 
equities  affecting  the  mortgage  transaction,  not  merely  by  the 
state  of  the  account.  Smith  v.  Parkes,  16  Beav.  115,  shews  that 
the  assignee  of  a  debt  takes  subject  to  all  equities. 

[BowEN,  L.  J.: — Are  you  not  estopped  by  the  deed  and  the  re- 
ceipt upon  it  from  saying  that  the  whole  sum  was  not  advanced? 
(Goodwin  v.  Robarts,  1  App.  Cas.  476.)] 

That  was  the  case  of  a  document  which  bv  custom  is  a  negotiable 


536  ASSIGNMENT   OF   MORTGAGE 

instrument.    The  present  is  the  case  of  a  mortgage  which  is  not 
given  with  a  view  of  its  passing  from  hand  to  hand. 

[BowEN,  L.  J.,  referred  to  In  re  Agra  and  Maderman's  Bank,  L. 
R.  2  Ch.  391.] 

The  present  case  is  more  hke  In  re  Natal  Investment  Company, 
L.  R.  3  Ch.  355,  in  which  the  Agra  Bank  Case  was  referred  to,  and 
which  is  a  strong  authority  in  my  favour.  There  is  no  estoppel 
from  a  recital  in  a  security  unless  it  is  shewn  that  the  recital  is  in- 
tended to  be  shewn  to  third  parties  to  induce  them  to  act  upon  it ; 
and  the  fact  that  no  prudent  person  takes  a  transfer  of  a  mortgage 
without  an  inquiry  from  the  mortgagor,  shews  that  the  recital  is 
not  intended  to  be  acted  on.  {Roll  v.  White,  31  Beav.  520,  and 
Athenceum  Life  Assurance  Society  v.  Pooley,  3  De  G.  &  J.  294,  sup- 
port my  contention.  I  say  then  that  the  mortgage  ought  to  be  cut 
down  as  against  Hunter.  No  prudent  transferee  of  a  mortgage 
ever  takes  his  transfer  without  inquiring  from  the  mortgagor,  and 
it  is  negligence  to  do  so.  The  case  is  quite  different  from  that  of 
an  absolute  sale,  because  there  an  inquiry  would  not  be  made  of 
the  original  vendor  unless  there  was  something  to  raise  suspicion. 

Millar,  Q.  C,  and  Laing,  for  Walker  and  Hunter:— As  against 
Walker  there  is  no  case:  he  ought  never  to  have  been  made  a 
party,  and  the  dismissal  as  against  him  must  stand.    As  regards 
Hunter,  assuming  that  the  whole  £250  was  not  advanced,  we 
say  that  he  is  not  affected  by  that.     If  a  person  takes  a  transfer 
of  a  mortgage  without  inquiring  from  the  mortgagor,  he  does  so 
at  his  own  risk  as  regards  the  state  of  the  account,  but  the  mort- 
gagor is  estopped  from  saying  that  any  statement  made  by  him- 
self is  untrue.    The  transferee  has  a  right  to  act  on  any  such  state- 
ment.    Everybody  knows  that  the  sum  due  on  a  mortgage  may 
have  been  reduced  by  part  payment,  and  if  a  transferee  makes 
no  inquiry  from  the  mortgagor  the  mortgagor  gets  the  l^enefit  of 
previous  part  payments  as  against  him.     By  saying  that  a  less 
sum  than  the  original  principal  is  now  due  he  is  not  contradicting 
anything  in  the  mortgage  deed,  but  here  the  mortgagor  is  alleging 
as  against  a  bond  fide  purchaser  without  notice  that  the  statement 
in  the  mortgage  deed  as  to  the  suin  advanced  is  not  true.    That 
cannot  be  allowed.    Hunter  v.  Walters,  L.  R.  7  Ch.  75;  West  v. 
Jones,  1  Sim  (n.  s.)  205;  Rice  v.  Rice,  2  Drew.  73.     In  Shropshire 
Union  Railways  and  Canal  Company  v.  The  Queen,  L.  R.  7  H.  L. 
496,  509,  Lord  Cairns  refers  to  Rice  v.  Rice,  with  appro) )ation. 
The  principle  is  not  confined  to  cases  where  A.  makes  a  written 
representation  to  B.  with  the  intention  that  it  shall  be  shewn  to 


BICKERTON   V.    WALKER  537 

C,  for  ])oth  Lord  Cairns  in  the  last-mentioned  case,  and  Lord 
Hatherley  in  Hunter  v.  Walters,  lay  it  down  broadly  that  a  receipt 
for  money  estops  the  party  giving  it,  as  between  him  and  a  third 
person  who  has  acted  on  the  faith  of  it. 

[Fry,  L.  J.: — An  assignment  of  a  chose  in  action  is  subject  to 
all  equities.  Do  you  say  that  the  receipt  is  an  assertion  that 
there  are  no  such  equities?] 

I  say  that  at  all  events  it  makes  the  equities  unequal;  a  person 
who  has  given  a  receipt  stating  that  he  has  received  money,  and 
then  disputes  its  truth,  cannot  have  as  good  an  equity  as  a  person 
who  acted  on  the  faith  of  the  receipt. 

[BowEN,  L.  J.;— What  do  you  say  to  In  re  Natal  Investment 
Company,  L.  R.  3  Ch.  355?] 

In  that  case  there  was  no  receipt,  and  no  one  buying  a  deben- 
ture in  the  market  buys  it  on  the  faith  of  the  whole  of  the  money 
having  been  advanced,  it  being  notorious  that  debentures  are  often 
issued  below  par.  In  none  of  the  cases  cited  against  us  was  there 
any  indorsed  receipt.  White  v.  Wakefield,  7  Sim.  401,  is  strong  in 
our  favour. 

The  judgment  of  the  Court  (Sir  James  Hannen,  and  Bowen  and 
Fry,  L.  JJ.),  was  delivered  by 

Fry,  L.  J. :  ^  As  the  legal  interest  in  the  legacy  was  and  is  vested 
in  the  trustee  of  Mrs.  Goulston's  will,  it  is  evident  that  the  interests 
both  of  the  plaintiffs  and  of  the  defendant  Hunter  are  equitable 
interests  only,  and  the  real  question  for  our  decision  is,  what  are 
the  relative  merits  of  these  persons  having  adverse  equitable  in- 
terests? If  the  merits  of  the  one  are  greater  than  those  of  the 
other,  the  Court  will  give  the  priority  to  the  greater  merits;  if  and 
only  if  the  merits  are  equal,  it  will  give  the  priority  of  right  to  the 
one  who  is  prior  in  point  of  time. 

The  plaintiffs  executed  a  deed  which  recited  that  they  had 
received  the  whole  sum  of  £250,  and  which  stipulated  that  their 
right  of  redemption  should  be  on  payment  of  the  sum  of  £250  and 
interest,  they  signed  a  receipt  on  the  back  of  the  deed  stating 
that  they  had  in  fact  received  this  sum  of  £250,  and  they  permitted 
Bates,  or  Astley,  who  was  acting  with  or  for  him,  to  have  pos- 
session of  the  deed  containing  these  false  statements.  That  the 
plaintiffs  were  in  a  moral  point  of  view  excusable  for  these  acts  is 
beyond  doubt,  and  that  they  were  deceived  b}^  those  whom  tiiey 
trusted,  and  as  such  are  objects  of  sympathy,  is  equally  clear. 

1  Portion  of  opinion  omitted. 


538  ASSIGNMENT   OF   MORTGAGE 

But  they  were  inexact  and  careless,  and  placed  in  the  hands  of 
Bates  or  Astley  the  means  of  deceiving  other  persons,  and  these 
are  in  the  view  of  a  Court  of  Equity  demerits. 

Was  Hunter  guilty  of  negligence  or  want  of  care  in  his  part  of 
the  transaction?    He  must,  on  the  evidence  before  us,  be  taken 
to  have  advanced  his  money  on  the  faith  of  the  production  of  the 
mortgage  deed  and  receipt  signed  by  the  plaintiffs;  and  if  the 
assignment  by  the  plaintiffs  had  been,  not  a  mortgage  but  an  ab- 
solute conveyance,  it  would,  we  think,  have  been  clear  that  there 
would  have  been  no  negligence  whatever  on  the  part  of  the  de- 
fendant Hunter  in  not  inquiring  of  the  plaintiffs  as  to  their  rights 
or  claims.    But  it  has  been  argued  before  us  that  there  is  a  wide 
difference  in  this  respect  between  a  mortgage  and  an  absolute  con- 
veyance, because  it  is  said,  and  said  truly,  that  in  the  ordinary 
course  of  business  a  prudent  assignee  of  a  mortgage,  before  paying 
his  money,  requires  either  the  concurrence  of  the  mortgagor  in  the 
assignment,  or  some  information  from  him  as  to  the  state  of  ac- 
counts between  mortgagor  and  mortgagee.    The  reason  of  this 
course  of  conduct  is  however,  in  our  opinion,  to  be  found  in  the 
fact  that  an  assignee  of  a  mortgage  is  affected  by  all  transactions 
which  may  have  taken  place  between  mortgagor  and  mortgagee 
subsequently  to  the  mortgage,  and  the  assignee  is  bound  to  give 
credit  for  all  moneys  received  by  his  assignor  before  he  has  given 
notice  of  the  assignment  to  the  mortgagor.     But  in  the  present 
case  the  assignment  was  made  very  soon  after  the  execution  of  the 
mortgage,  and  before  the  time  for  pajnnent  had  arrived;  so  that, 
whilst  it  was  possible,  it  was  not  probable,  that  any  payment 
would  have  been  made  either  of  principal  or  interest;  and  we  are 
of  opinion  that  if  an  assign  is  willing  to  take  the  risk  of  any  pay- 
ment having  been  made  after  the  date  of  the  mortgage  he  is  not 
guilty  of  carelessness  or  negligence  if,  in  the  absence  of  any  circum- 
stances to  arouse  suspicion,  he  relies  upon  the  solemn  assurance 
under  the  hand  and  seal  of  the  mortgagor  as  to  the  real  bargain 
carried  into  effect  by  the  mortgage  deed,  upon  the  possession  of 
that  deed  by  the  mortgagee,  and  upon  the  receipt  for  the  full 
amount  of  the  mortgage  money  under  the  hand  of  the  mortgagor. 
The  presence  of  a  receipt-  indorsed  upon  a  deed  for  the  full 
amount  of  the  consideration  money  has  always  been  considered  a 
highly  important  circumstance.    The  importance  attached  to  this 
circumstance  seems  at  first  sight  a  little  remarkable  when  it  is 
remembered  that  the  deed  almost  always  contains  a  receipt,  and 
often  a  release,  under  the  hand  and  seal  of  the  parties  entitled  to 


OLDS    V.    CUMMINGS  539 

the  money.  But  there  are  circumstances  which  seem  to  justify 
the  view  which  has  prevailed  as  to  its  importance.  A  deed  may 
be  delivered  as  an  escrow,  but  there  is  no  reason  for  giving  a  re- 
ceipt till  the  money  is  actually  received,  unless  it  be  to  enable 
the  person  taking  the  receipt  to  produce  faith  by  it.  A  deed  is 
not  always,  perhaps  rarely,  understood  by  the  parties  to  it,  but  a 
receipt  is  an  instrument  level  with  the  ordinary  intelligence  of 
men  and  women  who  transact  business  in  this  country,  and  which 
he  who  runs  may  read  and  understand. 

Our  decision  follows,  as  will  be  obvious  to  those  who  are  familiar 
with  this  branch  of  law,  the  general  lines  laid  down  by  Kindersley, 
V.  C,  in  Rice  v.  Rice,  2  Drew.  73.  For  the  solution  of  the  particular 
question  which  distinguishes  this  case  from  that,  viz.,  whether 
there  is  for  this  purpose  any  difference  between  a  mortgage  and 
an  absolute  conveyance,  we  have  not  been  aided  by  any  authority 
cited  to  us  at  the  bar. 

For  the  reasons  already  given  we  dismiss  thj?  appeal  with  costs. 


OLDS   V.   CUMMINGS 

Supreme  Court  of  Illinois,  1863 

(31  III.  188) 

Writ  of  error  to  the  Circuit  Court  of  Bureau  county;  the  Hon. 
M.  E.  Hollister,  Judge,  presiding. 

This  was  a  bill  in  chancery  exhibited  in  the  Circuit  Court  by 
Justin  H.  Olds  against  Preston  Cummings,  Cynthia  Cummings, 
his  wife,  and  others,  asking  the  foreclosure  of  a  mortgage. 

It  appears  that  on  the  21st  of  November,  1857,  Preston  Cum- 
mings executed  to  the  order  of  Charles  L.  Kelsey  his  two  certain 
promissory  notes,  both  payable  some  months  thereafter.  On  the 
same  day  on  which  the  notes  were  executed,  Preston  Cummings, 
with  his  wife,  Cynthia  Cummings,  to  secure  the  payment  of  these 
notes,  executed  and  delivered  to  Kelsey  a  mortgage  upon  real  es- 
tate. The  notes  were  assigned  to  Olds,  the  complainant,  by  Kelsey, 
the  payee,  as  the  bill  alleges,  before  their  maturity.  Olds,  the  as- 
signee, sought  by  this  bill  to  foreclose  the  mortgage  mentioned. 
Cummings,  in  his  answer,  admits  the  execution  of  the  notes  and 
mortgage  described  in  the  bill,  but  interposes  the  defense  of  usury. 
It  is  also  alleged  in  the  answer,  that  the  assignment  of  the  notes 
by  Kelsey  to  Olds  was  made  (if  at  all)  long  after  their  maturity; 


540  ASSIGNMENT   OF   MORTGAGE 

but  that,  in  fact,  the  matter  of  the  assignment  was  only  colorable, 
not  made  bona  fide  for  a  valuable  consideration,  and  only  to  pre- 
vent the  defendants  setting  up  the  defense  before  mentioned. 

The  record  contains  voluminous  proofs  upon  these  contested 
questions  of  fact;  but  it  is  not  important  to  consider  the  evidence, 
as  the  point  determined  arises  out  of  the  facts  as  insisted  upon  bj-- 
the  complainant  himself. 

The  Circuit  Court  held  that  the  equity  of  the  case  was  with  the 
defendant,  Preston  Cummings,  and  that  there  was  usury  in  the 
notes  sued  upon,  of  which  usury  the  complainant  had  notice,  and 
that  he  was  not  entitled  to  recover  the  same,  but  only  the  principal 
and  interest  in  the  notes,  after  deducting  the  usury  which  they  con- 
tained: and  a  decree  was  rendered  accordingly.  Olds,  the  com- 
plainant below,  then  sued  out  this  writ  of  error,  and  questions  the 
correctness  of  that  decree,  because,  among  other  grounds,  the  Cir- 
cuit Court  sustained  the  defense  of  usury  as  against  him. 

Mr.  Chief  Justice  Caton  delivered  the  opinion  of  the  court : 
We  do  not  find  it  necessary  to  determine  the  question  whether 
Olds  was  a  bona  fide  purchaser  of  this  mortgage  or  not.  In  a  case 
submitted  subsequent  to  this  one  we  have  been  called  upon  to  ex- 
amine the  question  as  to  how  far  the  rights  of  the  assignee  of  a 
mortgage,  purchased  for  a  valuable  consideration  l^efore  due,  and 
in  ignorance  of  any  equities  or  defense,  shall  be  affected  by  such 
defense;  and,  as  this  record  also  presents  the  question,  and  as  the 
conclusion  at  which  we  have  arrived  decides  the  case,  we  shall  here 
consider  this  question  and  none  other. 

By  the  common  law  choses  in  action  were  not  assignable.  For 
the  convenience  of  commerce,  by  the  statute  of  Anne,  in  England, 
certain  choses  in  action  were  made  assignable,  so  as  to  vest  in  the 
assignee  the  legal  title,  as  promissory  notes  and  bills  of  exchange. 
We  have  a  statute,  also,  making  certain  choses  in  action  assignable, 
prescribing  a  particular  mode  in  which  they  shall  be  assigned.  Our 
statute  provides  that  any  promissory  note,  bond,  bill,  or  other  in- 
strument in  writing,  whereby  one  person  promises  to  pay  to  another 
any  sum  of  money  or  article  of  personal  property,  or  sum  of 
money  in  personal  property,  shall  be  assignable  by  indorsement 
thereon.  Now,  the  mortgage,  to  foreclose  which  this  l)ill  was  filed, 
was  given  to  secure  the  payment  of  two  promissory  notes  which 
were  assigned  by  the  payee  and  mortgagee  to  the  complainants. 
This  was,  in  equity,  an  assignment  of  the  mortgage.  The  notes 
were  assignable  by  the  statute,  but  the  mortgage  is  not,  nor  is  it 


OLDS    V.    CUMMINGS  541 

assignable  by  the  common  law.  The  assignee  of  a  mortgage  has 
no  remedy  upon  it  by  law,  except  it  be  treated  as  an  absolute 
conveyance,  and  the  mortgagee  convey  the  premises  to  the  as- 
signee by  deed;  and  upon  the  question  whether  this  can  be  done, 
the  authorities  are  conflicting.  Even  our  statute,  authorizing 
foreclosures  of  mortgages  by  scire  facias,  has  carefully  confined  the 
right  to  the  mortgagee,  and  does  not  authorize  this  to  be  done  by  as- 
signees. But  it  is  said  that  the  assignment  of  the  notes  carries  with 
it  the  mortgage,  which  is  but  an  incident  to  the  principal  debt. 
That  is  true  in  equity,  and  only  in  equity.  Courts  of  equity  will 
not  be  confined  to  legal  forms  and  legal  titles,  but  look  beyond  these 
to  the  substantial,  equitable  rights  of  parties,  and  allow  parties 
who  have  equitable  rights  to  enforce  those  rights  in  their  own 
names,  without  regard  to  legal  titles.  The  assignee  of  a  judgment, 
even,  may,  in  his  own  name,  enforce  it  in  equity.  But  while  courts 
of  equity  thus  enforce  equitable  rights,  they  do  it  with  a  scrupu- 
lous regard  to  the  equitable  rights  of  others.  Thus,  if  the  assignee 
of  a  judgment  attempt  to  enforce  it  in  equity,  no  matter  how  much 
he  paid  for  it,  or  how  ignorant  he  might  have  been  that  it  had  been 
paid,  or  that  there  was  other  reason  why  it  should  not  be  collected, 
the  court  of  equity  will  look  into  all  the  circumstances,  and  will  not 
enforce  it  in  his  favor,  if  it  ought  not  to  be  enforced  in  the  hands  of 
the  assignor.  He  who  buys  that  which  is  not  assignable  at  law, 
relying  upon  a  court  of  chancery  to  protect  and  enforce  his  rights, 
takes  it  subject  to  all  infirmities  to  which  it  is  liable  in  the  hands 
of  the  assignor;  and  the  reason  is,  that  equity  will  not  lend  itself 
to  deprive  a  party  of  a  right  which  the  law  has  secured  him,  if  such 
right  is  intrinsically  just  of  itself. 

We  have  not  met  with  a  single  case  where  remedy  has  been 
sought  in  a  court  of  chancery,  upon  a  mortgage,  by  an  assignee,  in 
which  every  defense  has  not  been  allowed  which  the  mortgagor  or 
his  representatives  could  have  made  against  the  mortgagee  himself, 
unless  there  has  been  an  express  statute  authorizing  the  assign- 
ment of  the  mortgage  itself.  There  are  many  cases  in  which  the 
assignees  have  been  protected  against  latent  equities  of  third  per- 
sons, whose  rights,  or  even  names,  do  not  appear  on  the  face  of  the 
mortgage.  And  the  reason  is,  that  it  is  the  duty  of  the  purchaser 
of  a  mortgage  to  inquire  of  the  niortgagor  if  there  be  any  reason 
why  it  should  not  be  paid;  but  he  should  not  be  required  to  inquire 
of  the  whole  world,  to  see  if  some  one  has  not  a  latent  equity  which 
might  be  interfered  with  by  his  purchase  of  the  mortgage,  as,  for 
instance,  a  cestui  que  trust. 


542  ASSIGNMENT   OF    MORTGAGE 

We  shall  refer  to  a  few  of  the  many  cases  to  be  met  with  on  this 
subject.  In  Murray  v.  Lylburn,  2  J.  C.  R.  441,  the  question  arose 
upon  a  bill  to  foreclose  a  mortgage  by  the  assignee,  and  Chancellor 
Kent  said:  "It  is  a  general  and  well-settled  principle,  that  the 
assignee  of  a  chose  in  action  takes  it  subject  to  the  same  equities  it 
was  subject  to  in  the  hands  of  the  assignor.  But  this  rule  is  gen- 
erally understood  to  mean  the  equity  residing  in  the  original 
obligor,  and  not  an  equity  residing  in  some  third  person,  against 
the  assignor."  And  for  this  distinction  he  assigns  the  reason  above 
stated.  Again,  he  says,  in  the  same  case:  ''But  bonds  and  mort- 
gages are  not  the  subjects  of  ordinary  commerce."  Here  is  ex- 
pressed the  very  essence  of  the  reason  of  the  law.  Mortgages  are 
not  commercial  paper.  It  is  not  convenient  to  pass  them  from 
hand  to  hand,  performing  the  real  office  of  money  in  commercial 
transactions,  as  notes,  bills  and  the  like.  When  one  takes  an  obli- 
gation secured  by  a  mortgage,  relying  upon  the  mortgage  as  the 
security,  he  must  do  it  deliberately,  and  take  time  to  inquire  if 
any  reason  exists  why  it  should  not  be  enforced ;  while  he  may  take 
the  mere  promise  to  pay  the  money,  as  commercial  paper,  and  de- 
pend upon  the  personal  security  of  the  parties  to  it.  It  may  be 
said  to  be  a  distinguishing  characteristic  of  commercial  paper,  that 
it  relies  upon  personal  security,  and  is  based  upon  personal  credit. 
It  is  a  part  of  the  credit  system,  which  is  said  to  be  the  life  of  com- 
merce, which  requires  commercial  instruments  to  pass  rapidly  from 
hand  to  hand.  Mortgage  securities  are  too  cumbersome  to  answer 
these  ends.  The  note  itself,  though  secured  by  a  mortgage,  is  still 
commercial  paper;  and  when  the  remedy  is  sought  upon  that,  all 
the  rights  incident  to  commercial  paper  will  be  enforced  in  the 
courts  of  law.  But  when  the  remedy  is  sought  through  the  me- 
dium of  the  mortgage;  when  that  is  the  foundation  of  the  suit, 
and  the  note  is  merely  used  as  an  incident,  to  ascertain  the  amount 
due  on  the  mortgage,  then  the  courts  of  equity,  to  which  resort  is 
had,  must  pause,  and  look  deeper  into  the  transaction,  and  see  if 
there  be  any  equitable  reason  w^hy  it  should  not  be  enforced.  He 
who  holds  a  note,  and  also  a  mortgage,  holds  in  fact  two  instru- 
ments for  the  security  of  the  debt;  first,  the  note  with  its  personal 
security,  which  is  commercial  paper,  and,  as  such,  may  be  enforced 
in  the  courts  of  law,  with  all  the  rights  incident  to  such  paper;  and 
the  other,  the  mortgage,  with  security  on  land,  which  may  be  en- 
forced in  the  courts  of  equity,  and  is  subject  to  the  equities  existing 
between  the  parties.  The  right  of  an  assignee  to  set  at  defiance  a 
defense  which  could  be  made  against  the  assignor  is  an  arbitrary 


OLDS    V.    CUMMINGS  543 

statutory  right,  created  for  the  convenience  of  commerce  alone,  and 
must  rely  upon  the  statute  for  its  support,  and  is  not  fostered  and 
encouraged  by  courts  of  equity. 

In  Westfall  v.  Jones,  23  Barb.  10,  the  Court  said:  "Does  the 
plaintiff,  being  a  bona  fide  purchaser  and  assignee  of  the  bond  and 
mortgage,  stand  in  any  better  condition  than  the  person  from  whom 
he  derived  his  title?  It  is  a  well-settled  principle  that  the  as- 
signee of  a  chose  in  action  takes  it  subject  to  all  the  equities  which 
existed  against  it  in  the  hands  of  the  assignor."  In  this  case  the 
defense  to  the  foreclosure  was  that  the  mortgage  was  given  without 
consideration,  and  to  defraud  creditors,  and  the  Court  refused  to 
enforce  it,  but  left  the  assignee,  as  it  would  have  left  the  mortgagee, 
where  their  contract  left  them.  The  case  thus  decides  that  the 
term  equities,  as  here  used,  means  defenses.  The  opinion  of  the 
Court  proceeds:  "But  I  am  prepared  to  hold  that  the  plaintiff  has 
no  other  or  greater  rights  in  relation  to  this  bond  and  mortgage, 
and  stands  in  no  better  position,  than  Parsons,  the  mortgagee." 

So,  in  Pennsylvania  the  same  rule  was  held.  In  Mott  v.  Clark, 
9  State  R.  399,  the  Court  said:  "He  (the  assignee)  takes  it  (the 
mortgage)  subject  to  all  the  equities  of  the  mortgagor,  but  not  to 
the  latent  equities  of  a  third  person;"  holding  the  same  rule  pre- 
cisely as  the  case  first  referred  to,  as  decided  by  Chancellor  Kent ; 
and  such  also  was  the  case  of  Prior  v.  Wood,  31  Pa.  State  R.,  where 
the  Court  protected  the  assignee  of  the  mortgagee  against  the  latent 
equities  of  third  persons  against  the  assignor.  And  this  is  as  far 
as  any  Court  has  gone  in  the  protection  of  a  bona  fide  assignee  of  a 
mortgage,  when  the  proceeding  was  on  the  mortgage  itself,  and  in 
the  absence  of  any  express  statutory  provision  authorizing  the  as- 
signment of  the  mortgage. 

We  find  the  law  to  be,  both  upon  principle  and  authority,  that 
the  assignee  of  the  mortgage  in  this  case  took  it  subject  to  the  de- 
fense which  the  mortgagor  had  against  it  in  the  hands  of  the  as- 
signor. Of  the  sufficiency  of  that  defense,  to  the  extent  admitted 
by  the  Circuit  Court,  no  question  was  made. 

The  decree  must  be  affirmed. 


544  ASSIGNMENT   OF   MORTGAGE 

BAILY  V.  SMITH 

Supreme  Court  of  Ohio,  1863 

(14  Oh.  St.  396) 

Ranney,  J.  On  the  8th  day  of  October,  1853,  the  plaintiff  gave 
to  the  defendant,  Charles  H.  Bolles,  his  negotiable  promissory 
note  for  the  sum  of  $5370,  and  payable  two  years  after  date,  with 
interest.  Prior  to  the  14th  of  December,  in  the  same  year,  sundry 
payments  had  been  made  and  indorsed  thereon,  leaving  then  due 
the  sum  of  $2500;  and  on  that  day  the  plaintiff  executed  and  de- 
livered a  mortgage  upon  real  estate  situated  in  Lorain  county  to 
secure  this  balance.  On  the  9th  of  June,  1856,  he  filed  his  amended 
petition  against  Bolles,  the  original  payee  of  the  note,  Kendall  and 
Lucas,  through  whose  hands  the  note  and  mortgage  had  passed  by 
assignment,  and  Smith,  the  then  holder,  to  compel  the  delivery 
and  cancellation  of  these  instruments;  alleging  that  the  note  was 
given  for  a  pretended  patent  right  for  a  machine  which  was  utterly 
worthless,  whether  patented  or  not;  that  both  the  note  and  mort- 
gage were  obtained  by  fraud,  and  that  every  subsequent  holder 
thereof  took  them  with  full  notice  of  the  fraud  and  want  of  con- 
sideration. 

Smith  alone  answered  the  petition,  and  claimed  to  have  pur- 
chased the  note  and  mortgage  from  Lucas  shortly  before  they  fell 
due,  without  notice  of  any  fraud  or  want  of  consideration,  and  to 
be  a  bona  fide  holder  thereof  for  value,  and  entitled  to  be  protected 
as  such. 

The  plaintiff  obtained  the  relief  demanded  in  his  petition  for 
everything  beyond  the  amount  paid  by  Smith  for  the  note  and 
mortgage,  with  interest  thereon,  and  for  that  amount  an  affirma- 
tive judgment  for  the  sale  of  the  mortgaged  premises  was  ren- 
dered in  favor  of  Smith,  and  the  plaintiff  was  ordered  to  pay  the 
costs  of  the  action. 

This  judgment  was  founded  upon  a  finding  by  the  court  that 
the  note  was  obtained  by  fraud,  and  without  consideration,  of 
which  the  intermediate  parties,  Kendall  and  Lucas,  had  notice, 
and  that,  as  against  them  and  Bolles,  the  plaintiff  was  entitled  to 
the  relief  prayed  for  in  his  petition;  but  the  court  further  find  that 
Smith  purchased  the  note  and  mortgage  from  Lucas  in  September, 
1855,  and  paid  therefor  $1250,  without  knowledge  of  the  fraud 
and  want  of  consideration  existing  between  the  original  parties. 


BAILY    V.    SMITH  545 

and  is  entitled  to  hold  the  mortgage  for  the  sum  so  paid  with  in- 
terest, and  to  recover  thereon  for  that  amount.  Passing  by,  with- 
out any  remark,  the  objection  that  this  affirmative  judgment  in 
favor  of  Smith  could  not  have  been  rendered  without  a  distinct 
counterclaim  interposed  by  him,  and  coming  at  once  to  the  merits 
of  the  controversy,  it  is  evident  that  the  judgment  can  only  be 
supported  upon  the  establishment  of  the  two  propositions:  first, 
that  upon  the  facts  found  by  the  court,  taken  in  connection  with 
his  answer  asserting  his  title,  the  defendant.  Smith,  in  the  sense 
of  the  commercial  rule,  was  a  bona  fide  holder  of  the  note,  without 
notice  of  the  equities  existing  between  the  original  parties;  and, 
second,  that  the  immunity  belonging  to  the  note  in  the  hands  of 
such  a  holder,  in  virtue  of  this  rule,  is  extended  to  the  mortgage 
by  which  it  was  originally  secured,  and  equally  entitles  the  holder 
to  recover  upon  that. 

A  sum  of  money  due  upon  the  note,  from  Baily  to  Smith,  is  an 
indispensable  predicate  upon  which  to  found  a  judgment  upon  the 
mortgage;  and  as  no  personal  judgment  was  rendered  or  attempted, 
and  as  both  note  and  mortgage,  until  they  came  to  the  hands  of 
Smith,  are  found  to  have  been  fraudulent  and  void,  it  is  equally 
evident  that  he  can  sustain  his  judgment  only  upon  the  assumption 
that  the  attributes  of  negotiability  belonged  to  the  mortgage  as 
well  as  the  note,  and  if  this  can  not  be  done,  that  the  finding  upon 
the  note  falls  with  the  judgment  rendered  upon  the  mortgage. 
Without  such  finding,  there  can  be  no  such  judgment;  and  with 
the  finding,  there  still  can  be  no  judgment,  if  Smith  only  succeeded 
to  the  rights  of  his  assignor  in  the  mortgage. 

[The  learned  judge  here  considers  at  length  the  objections  urged 
by  plaintiff's  counsel,  in  opposition  to  the  finding  of  the  court  be- 
low that  Smith  was  a  bona  fide  holder  of  the  note  and  mortgage  for 
value,  and  comes  to  the  conclusion  that  there  was  no  error  in  the 
finding.] 

The  remaining  question  is  one  of  much  importance,  and  for  the 
first  time  presented  in  this  court.  As  it  was  supposed  to  be  in- 
volved in  other  cases  upon  our  docket,  we  have  given  opportunity 
to  counsel  in  those  cases  to  be  heard,  and  after  full  argument,  we 
have  bestowed  upon  it  very  careful  attention.  Does  the  fact  that  a 
note,  obtained  by  fraud,  has  passed  into  the  hands  of  a  bona  fide 
indorsee,  entitle  him  to  enforce  a  mortgage  given  to  the  original 
holder  to  secure  its  payment?  Or  may  the  mortgagor  still  insist 
upon  the  fraud,  as  a  defense  to  an  action  brought  to  foreclose  it? 
On  the  one  hand,  the  question  is  in  no  way  affected  by  the  further 


546  ASSIGNMENT   OF   MORTGAGE 

question  whether  a  mortgagee  acquires  such  an  interest  in  the  land 
as  to  enable  his  grantee,  being  also  assignee  of  the  note,  by  deed 
duly  executed,  to  claim  the  benefit  of  the  rule  which  protects  bona 
fide  purchasers  of  real  estate — there  being  no  claim  that  any  such 
deed  was  made?  And  on  the  other,  we  assume,  as  undoubted,  that, 
whether  a  written  assignment  was  made  or  not,  the  assignee  of  the 
note  acquired  all  the  rights  and  interests  of  the  assignor  in  the 
mortgage.  Very  little  aid  is  to  be  derived,  either  from  adjudged 
cases  or  the  elementary  books,  in  the  solution  of  the  precise  ques- 
tion now  before  us.  This  is  not  because  the  purchase  and  assign- 
ment of  mortgages  is  a  new  thing.  On  the  contrary,  scarcely  any 
business  transaction  has  been  more  common  and  familiar,  or  has 
oftener  engaged  the  attention  of  the  courts.  Nor  has  the  nature 
of  this  instrument,  and  the  rights  of  parties  growing  out  of  its 
assignment,  either  alone  or  in  connection  with  a  non-negotiable 
security,  escaped  attention,  or  failed  to  receive  very  full  and  accu- 
rate illustration.  In  such  case,  the  universally  acknowledged  doc- 
trine from  the  case  of  Davies  v.  Austeyi,  1  Ves.  247,  to  Bush  v, 
Lathrop,  22  New  York  R.  535,  has  been,  that  it  is  to  be  regarded 
as  a  chose  in  action,  and,  as  expressed  by  Lord  Thurlow,  "the  pur- 
chaser must  abide  by  the  case  of  the  person  from  whom  he  buys;" 
but  during  all  that  long  period,  neither  in  England  nor  in  any  of 
the  old  states  of  the  Union,  does  the  question  seem  to  have  been 
presented,  whether  it  might  not  have  a  different  effect  upon  its 
assignment  when  made  to  secure  a  negotiable  instrument.  This 
may  be  accounted  for,  in  part,  undoubtedly  by  the  general  practice 
of  taking  a  non-negotiable  bond  with  a  mortgage;  but  it  cannot 
be  doubted  that  mortgages  have  many  times  been  taken  to  secure 
negotiable  bills  and  notes,  fraudulently  transferred,  and  if  such  a 
distinction  was  thought  to  exist,  it  seems  very  singular  that  the 
holders  should  never  have  made  the  attempt  to  avail  themselves 
of  such  securities.  In  New  York  the  attempt  has  been  frequently 
made  to  confine  the  principle  that  the  purchaser  must  abide  by 
the  case  of  the  seller,  to  the  original  debtor,  allowing  him  to  make 
the  same  defense  against  the  assignee  that  he  could  against  the  as- 
signor, but  protecting  the  assignee  without  notice  from  what  have 
been  denominated  latent  equities,  or  interests  in  third  persons,  not 
in  the  apparent  chain  of  title.  And  this  for  the  very  plausible  rea- 
son that  one  proposing  to  purchase  such  an  instrument  might  in- 
quire of  the  debtor  whether  he  pretended  to  any  defense,  and 
make  his  answer  estop  him  from  afterward  asserting  any,  but  that 
no  amount  of  diligence  would  enable  him  to  protect  himself  from 


BAILY    V.    SMITH  547 

such  latent  equities.  But,  after  some  vacillation  in  judicial  opin- 
ion, the  Court  of  Appeals,  in  Bush  v.  Lathrop,  repudiated  the  dis- 
tinction, and  held  that  the  purchaser  in  such  cases  must  rely  upon 
the  good  faith  of  the  seller,  that  he  could  "take  only  such  title  as 
the  seller  had  and  no  other,"  and  that  if  mortgages  were  "to  be 
further  assimilated  to  commercial  paper,  the  legislature  must  so 
provide." 

But  the  direct  question  arising  upon  mortgages  given  to  secure 
negotiable  paper  has  arisen  in  two  of  the  new  states  of  the  west, 
whose  courts  are  entitled  to  high  respect  for  their  learning  and 
ability,  and  it  has  there  been  held  that  the  quality  of  negotiability 
is  so  far  imparted  to  such  mortgages  as  to  make  them  available  in 
the  hands  of  a  bona  fide  indorser  of  the  paper,  without  any  regard 
to  the  equitable  rights  of  the  original  parties.  (Reeves  v.  Scully, 
Walker's  Ch.  Rep.  248;  Button  v.  Ives,  5  Michigan  Rep.  515; 
Fisher  v.  Otis,  3  Chand.  Rep.  83;  Martineau  v.  McCollum,  4  id. 
153;  Croft  v.  Bunster,  9  Wisconsin  Rep.  503.)  In  the  first  of  these 
cases,  decided  by  the  Chancellor  of  Michigan  in  1843,  no  reasons 
are  assigned  or  authorities  cited;  and  in  Button  v.  Ives,  decided 
by  the  Supreme  Court  in  1858,  the  doctrine  is  again  advanced 
upon  the  authority  of  Reeves  v.  Scully,  and  the  two  Wisconsin  cases, 
reported  in  3  and  4  Chandler.  On  referring  to  the  first  case  de- 
cided in  that  state  (Fisher  v.  Otis),  we  find  it  professedly  based  on 
authority,  and  it  serves  to  show  upon  what  a  slender  foundation  a 
line  of  decisions  may  be  made  to  rest.  The  court  say:  "This  doc- 
trine is  sustained  by  respectable  authorities,  and  by  the  reason  and 
sound  policy  which  have  long  ruled  in  relation  to  commercial  pa- 
per;" and  Powell  on  Mortgages,  908,  and  note  are  cited.  Mr. 
Powell  certainly  did  suggest  the  question  whether  such  a  distinc- 
tion might  not  be  made.  His  exact  position  is  thus  stated  by  Mr. 
Coventry  in  the  note:  "  When  it  is  said  that  a  debt  is  not  assignable 
at  law,  it  must  be  understood  with  this  restriction,  that  if  it  be 
secured  by  a  negotiable  instrument,  such  as  a  bill  of  exchange,  the 
legal  interest  will  pass  by  indorsement,  and  this  has  induced  the 
learned  author,  in  the  next  paragraph  of  the  text,  to  suggest 
whether,  in  such  a  case,  the  rule  as  to  the  mortgagee's  liability 
would  apply."  The  rule  here  referred  to  is  that  announced  by 
Lord  Loughborough  in  the  leading  case  of  Matthews  v.  Wallwyn, 
4  Ves.  126,  that  the  assignee  of  a  mortgage  takes  it  subject  to  all 
equities  which  could  be  asserted  against  his  assignor.  Now,  it  may 
be  fairly  assumed  that  Mr.  Powell  supposed  that  such  a  distinction 
could  be  judiciously  made;  but  it  must  be  admitted  that  he  had 


548  ASSIGNMENT   OF   MORTGAGE 

then  no  authority  to  base  it  upon,  that  neither  the  judicial  records 
of  England,  nor  in  any  of  the  old  States,  furnish  any  evidence  that 
it  has  ever  been  adopted,  and  that  it  was  first  acted  upon,  nearly 
half  a  century  after  the  suggestion  was  made,  by  a  new  State  upon 
another  continent.  Under  such  circumstances,  it  can  not  be  rea- 
sonably claimed  that  we  are  at  liberty  to  regard  it  as  an  established 
principle,  and  we  can  only  adopt  it  when  we  are  convinced  that  it 
is  correct  in  principle,  and  consistent  with  the  analogies  of  the  law. 
The  reasons  for  supposing  it  to  be  so  are  well  stated  in  the  case  of 
Crojt  V.  Bunster,  9  Wis.  Rep,  510.  The  reason  assigned,  it  is  said, 
why  the  assignee  can  recover  no  more  in  equity  than  is  actually 
due  from  the  mortgagor  to  the  mortgagee,  is,  that  he  could  recover 
no  more  at  law  on  the  bond  or  covenant,  and  the  reason  ceasing 
as  to  negotiable  securities,  the  rule  also  ceases  to  have  application; 
that  the  debt  is  the  principal  thing,  and  the  mortgage  the  mere 
incident,  following  the  debt  wherever  it  goes,  and  deriving  its  char- 
acter from  the  instrument  which  evidences  the  debt.  To  which 
may  be  added  the  consideration  pressed  upon  our  attention  in  argu- 
ment, that,  if  a  recovery  may  be  had  for  the  debt,  the  mortgagor 
can  have  no  interest  in  withdrawing  the  mortgaged  property  from 
liability  to  satisfy  it.  This  last  position  is  easily  disposed  of.  If 
it  were  true,  it  would  furnish  no  authority  for  changing  the  legal 
character  and  incidents  of  the  mortgage  deed,  and  it  is  evident 
that  other  lien-holders  would  often  have  a  deep  interest  in  the 
question.  But  it  is  not  true  as  to  the  mortgagor.  The  right  to 
dispose  of  property  at  the  will  of  the  owner,  and  to  pay  honest  debts 
instead  of  those  tainted  with  fraud,  are  valuable  privileges,  of 
which  he  should  not  be  deprived  without  a  necessity  exists;  and  a 
decree  upon  the  mortgage  would  very  often  deprive  him  of  the 
benefits  of  the  homestead  law,  which  could  not  be  effected  by  a 
judgment  upon  the  fraudulent  note.  It  is  very  evident  also  that 
the  wife  of  the  mortgagor,  in  a  large  majority  of  cases,  might  have 
a  deep  interest  in  the  solution  of  this  question.  Wholly  incapable 
of  becoming  a  party  to  any  commercial  contract  whatever,  she 
may  nevertheless  convey  her  estate,  or  release  her  dower,  by  way 
of  mortgage  for  the  security  of  her  husband's  negotiable  paper.  If 
the  mortgage  is  to  be  deemed  negotiable  in  the  hands  of  an  assignee 
of  the  paper,  we  see  no  escape  from  the  conclusion  that  the  mort- 
gage must  be  enforced  against  her,  however  gross  and  palpable 
the  fraud  may  be  by  which  it  was  obtained. 

In  a  general  sense,  it  may  be  very  well  and  very  correct  to  speak 
of  a  mortgage  as  an  incident  to  the  debt  it  is  created  to  secure;  but 


BAILY    V.    SMITH  549 

the  importance  of  this  mere  term  may  be  easily  overrated.  It 
certainly  is  not  one  of  the  incidental  effects  of  the  creation  of  the 
debt  itself,  and  it  can  only  be  made  to  have  relation  to  the  debt  by 
the  force  of  the  contract  contained  ifi  the  mortgage;  and  is  incident 
to  the  debt  only  in  the  same  sense  that  every  independent  con- 
tract, having  for  its  object  the  payment  or  better  security  of  the 
debt,  is  incidental  to  it.  The  existence  of  the  debt  is  the  occasion 
out  of  which  they  arise,  and  the  subject  of  their  various  provisions; 
but  they  embrace  all  the  elements  of  a  perfect  contract  in  them- 
selves, and  are  enforced  by  appropriate  remedies,  according  to 
their  own  stipulations.  At  law,  a  mortgage  effects  the  conveyance 
of  an  estate  upon  condition;  but  in  the  view  of  a  court  of  equity, 
where  alone  the  rights  of  an  assignee  can  be  enforced,  it  is  a  chose 
in  action,  having  no  negotiable  quality,  and  not  differing  in  char- 
acter from  collateral  personal  agreements,  designed  to  effect  the 
same  object.  Any  of  these  collateral  agreements  may  be  entered 
into  for  the  purpose  of  securing  a  debt,  evidenced  by  a  negotiable 
instrument;  and  if  they  are  not  obtained  by  fraud,  and  rest  upon 
a  sufficient  consideration,  in  the  absence  of  any  agreement  to  the 
contrary,  they  undoubtedly  enure  in  equity  to  the  benefit  of  any 
owner  of  the  debt.  But  the  question  here  is,  whether  one  of  these 
collateral  agreements,  made  to  secure  a  negotiable  note,  loses  its 
character  of  a  mere  chose  in  action,  and  has  imparted  to  it  the 
qualities  of  negotiability,  so  that  upon  the  transfer  of  the  note  it 
ma}'  be  enforced,  although  obtained  by  fraud?  This  question  has 
been  repeatedl}'^  answered,  in  respect  to  a  class  of  collateral  agree- 
ments, much  more  intimately  connected  with  the  negotiable  instru- 
ment than  is  the  mortgage  deed.  We  refer  to  guarantees  indorsed 
upon  the  note  itself.  Passing  by  those  which  have  been  claimed 
to  be  such,  but  held  by  the  courts  to  be  mere  indorsements,  or  orig- 
inal contracts,  with  apt  words  of  negotiability  incorporated  in  them, 
the  universal  doctrine  has  been  that  the  legal  title  does  not  pass 
upon  the  transfer  of  the  note;  that  they  are  mere  non-negotiable 
choses  in  action,  and  to  be  treated  in  every  respect  as  such.  (La- 
morieux  v.  Hewit,  5  Wend.  307;  McLaren  v.  Watson's  Executors, 
26  Wend.  425;  Miller  v.  Gaston,  2  Hill,  188.)  In  the  first  of  these 
cases  Chief  Justice  Savage  says:  "Promissory  notes  are  negotiable 
only  by  virtue  of  the  statute,  but  this  negotiable  quality  is  not 
extended  to  any  other  instrument  relating  to  the  note;"  and 
Bronson,  J.,  in  the  last,  in  support  of  the  same  position,  says: 
"But  the  guarantee  itself  is  not  a  negotiable  instrument,  and  can 
not  be  transferred  to  a  third  person  so  as  to  give  him  a  legal  title 


550  ASSIGNMENT   OF   MORTGAGE 

to  proceed  in  his  own  name  against  the  guarantor.  As  in  the  case 
of  other  contracts  which  are  not  in  their  own  nature  assignable,  the 
remedy  upon  a  guarantee  is  confined  to  the  original  parties  to  the 
instrument."  We  have  said  that  these  instruments  are  much  more 
intimately  connected  with  the  note  than  is  a  mortgage  deed.  This 
will  be  apparent  when  it  is  remembered  that  the  one  ordinarily 
guarantees  the  particular  instrument  specified  in  it,  and  does  not 
survive  a  renewal  or  other  change  of  the  evidence  of  indebtedness ; 
while  the  other  secures  the  debt,  whatever  changes  may  intervene, 
until  it  is  paid;  and,  even  a  positive  statutory  bar  which  precludes 
a  recovery  upon  the  note,  it  has  been  held,  does  not  prevent  the  en- 
forcement of  the  mortgage.  {Fisher  v.  Mossman,  11  Ohio  St.  Rep. 
42.) 

In  order  to  sustain  the  judgment  rendered  in  this  case,  it  is 
indispensably  necessary  to  affirm — either  that  the  mortgage,  when 
made  to  secure  a  negotiable  note,  contrary  to  its  general  nature 
and  qualities,  becomes  a  negotiable  instrument  or  that  the  transfer 
of  such  a  note,  without  the  aid  of  any  statute,  or  of  any  judicial 
decision,  except  those  of  very  recent  date,  has  an  effect  beyond  the 
note  itself,  and  draws  after  it,  and  within,  one  of  the  most  important 
incidents  of  negotiability,  a  collateral  contract  having  relation  to 
the  same  debt.  A  very  careful  consideration  of  the  whole  subject 
has  convinced  us  that'we  have  no  power  to  do  either,  and  that 
neither  justice  nor  public  policy  would  be  promoted  bj'-  making 
the  attempt.  It  certainly  has  never  been  thought  to  be  within 
the  province  of  a  court  to  determine  what  instruments  should  be 
taken  from  the  list  of  mere  choses  in  action,  and  clothed  with  the 
attributes  of  negotiability.  Bills,  foreign  and  inland,  assumed 
this  position  upon  the  immemorial  custom  of  merchants,  and  were 
adopted  into  the  law  upon  the  reasons  which  avail  to  make  up 
the  great  body  of  the  common  law.  But  the  statute,  third  and 
fourth  Anne,  was  found  necessary  to  place  promissory  notes  upon 
the  same  footing;  and  from  that  day  to  this,  neither  in  Eng- 
land nor  in  this  country  has  an  instrument  been  added  without 
express  legislative  sanction.  Indeed,  this  could  not  well  be  other- 
wise. The  necessities  of  commerce,  and  the  instruments  best  cal- 
culated to  answer  its  purposes,  must  all  be  considered  before  any 
intelligent  decision  could  be  made.  These  are  legislative  functions, 
requiring  experience  and  extensive  information,  and  calling  for 
the  exercise  of  a  discretion  wholly  incompatible  with  the  fixed 
certainty  of  judicial  decision.  But  if  it  were  otherwise,  and  the 
discretion  rested  with  us,  we  could  not  introduce  the  mortgage 


BAILY    V.    SMITH  551 

(Iced  into  the  list  of  negotiable  instruments  without  disregarding 
the  very  foundation  principles  upon  which  such  paper  has  always 
been  supposed  to  rest.  From  the  case  of  Miller  v.  Race,  1  Burr.  R. 
452,  to  the  very  latest  case  in  our  own  reports,  the  language  of  the 
courts  has  been  uniform,  that  such  paper  is  only  allowed  in  the 
interests  of  commerce,  and  "possessing  some  of  the  attributes  of 
money,"  to  answer  the  purposes  of  currency.  Lord  Mansfield,  in 
answer  to  the  "ingenious"  argument  of  Sir  Richard  LIojtI  that  the 
plaintiff  could  take  nothing  by  assignment  from  a  thief  who  had 
stolen  paper,  said  the  fallacy  of  the  argument  consisted  in  com- 
paring bank  notes  to  what  they  did  not  resemble.  "They  are  not 
goods,"  he  said,  "not  securities,  nor  documents  for  debt  nor  are 
so  esteemed;  but  are  treated  as  money,  as  cash,  in  the  ordinary 
course  and  transaction  of  business,  by  the  general  consent  of  man- 
kind;" "the  course  of  trade  creates  a  property  in  the  assignee  or 
bearer,"  and  they  can  not  be  recovered  "after  they  have  been  paid 
away  in  currency,  in  the  usual  course  of  business."  This  was  said, 
it  is  true,  of  bank  notes;  but  the  same  principles,  and  for  the  same 
reasons,  were  afterward  applied  by  the  same  learned  judge  to  every 
description  of  negotiable  paper,  and  the  case  of  Miller  v.  Race  is 
still  the  leading  authority  upon  this  branch  of  commercial  law. 

Now,  mortgages  are  not  necessities  of  commerce;  they  have  none 
of  the  "attributes  of  money,"  they  do  not  pass  in  currency  in  the 
ordinary  course  of  business,  nor  do  any  of  the  prompt  and  decisive 
rules  of  the  law  merchant  apply  to  them.  They  are  "securities," 
or  "documents  for  debts,"  used  for  the  purposes  of  investment,  and 
unavoidably  requiring  from  those  who  would  take  them  with  pru- 
dence and  safety,  an  inquiry  into  the  value,  condition  and  title  of 
the  property  upon  which  they  rest;  nor  have  we  the  least  apprehen- 
sion that  commerce  will  be  impeded  by  requiring  the  further  inquiry 
of  the  mortgagor,  whether  he  pretends  to  any  defense,  before  a 
court  will  foreclose  his  right  to  defend  against  those  which  have 
been  obtained  by  force  or  fraud. 

Against  any  amount  of  mere  theory  advanced  to  sustain  the  posi- 
tion that  commerce  requires  these  instruments  to  be  invested  with 
negotiable  qualities,  may  be  successfully  opposed  the  stubborn  fact, 
that  in  the  first  commercial  country  of  the  world,  as  well  as  in  the 
great  commercial  states  of  the  American  Union,  they  have  never 
been  used  for  such  purposes,  or  heard  of  in  such  a  connection.  It 
is  quite  immaterial  whether  this  has  arisen  from  the  cause  supposed 
— that  they  are  never  made  to  secure  negotiable  paper — or  not; 
.since  it  equally  shows  that  no  necessity  for  their  use  has  ever  been 


552  ASSIGNMENT    OF   MORTGAGE 

felt.  A  long  experience  has  demonstrated  that  they  are  not  neces- 
sary instruments  of  active  trade  and  business;  and  we  but  follow 
in  the  footsteps  of  the  ablest  and  wisest  judges  when  we  say  that 
the  harsh  rule  which  excludes  equities,  and  often  does  injustice  for 
the  benefit  of  commerce,  should  not  be  applied  to  them.  This  re- 
mits them  to  the  position  they  have  so  long  occupied — that  of  mere 
choses  in  action;  and  whether  standing  alone  or  taken  to  secure 
negotialile  or  non-negotia])le  paper,  they  are  only  available  for 
what  was  honestl}^  due  from  the  mortgagor  to  the  mortgagee.  If 
they  are  assigned,  either  expressly  or  by  legal  implication,  the 
assignee  takes  only  the  interest  which  his  assignor  had  in  the  in- 
strument— acquires  but  an  equity,  and,  upon  the  long-established 
doctrine  in  courts  of  equity,  is  bound  to  submit  to  the  assertion 
of  the  prior  equitable  rights  of  third  persons.  To  hold  otherwise  is 
to  engraft  legal  incidents  upon  a  mere  equitable  title;  to  give  to  the 
transfer  of  negotiable  paper  an  effect  beyond  what  it  imports, 
or  is  necessary  in  the  accomplishment  of  its  legitimate  purposes ; 
and,  finally,  to  invest  with  negotiable  qualities  a  class  of  instru- 
ments, neither  used  for  nor  adapted  to  the  trade  and  commerce 
of  the  country,  and  thereby  to  deprive  the  mortgagor  of  the  just 
right  of  defending  against  fraud,  without  subserving  any  public 
policy  whatever. 

These  views  necessarily  lead  to  the  conclusion  that,  upon  the 
facts  found  in  the  court  below,  the  plaintiff  was  entitled  to  have 
his  title  cleared  from  the  incumbrance  of  this  fraudulent  mortgage, 
and  that  the  court  erred  in  giving  the  affirmative  judgment  of  fore- 
closure in  favor  of  Smith.  For  this  error  that  judgment  is  reversed, 
and  the  cause  remanded  for  further  proceedings. 

Peck,  C.  J.,  and  Brinckerhoff,  Scott  and  Wilder,  JJ.,  con- 
curred.^ 

1  Johnson  v.  Carpenter,  7  Minn.  see  Jones  v.  Dulick,  8  Kans. 
176  (1862);  Bouligny  v.  Forlier,  17  App.  855,  55  Pac.  Rep.  522 
La.  Ann.   121   (1865),  accmd.     And       (1898). 


CARPENTER   V.    LONGAN  553 

CARPENTER  v.  LONGAN 
iSuPREME  Court  of  the  United  States,  1872 
(16  Wall.  271) 
Appeal  from  the  Supreme  Court  of  Colorado  Territory. 

Mr.  Justice  Swayne  stated  the  case,  and  delivered  the  opinion 
of  the  court.— On  the  5th  of  March,  1867,  the  appellee,  Mahala 
Longan,  and  Jesse  B.  Longan,  executed  their  promissory  note  to 
Jacob  B.  Carpenter-,  or  order,  for  the  sum  of  $980,  payable  six- 
months  after  date,  at  the  Colorado  National  Bank,  in  Denver  City, 
with  interest  at  the  rate  of  three  and  a  half  per  cent,  per  month 
until  paid.  At  the  same  time  Mahala  Longan  executed  to  Car- 
penter a  mortgage  upon  certain  real  estate  therein  described.  The 
mortgage  was  conditioned  for  the  payment  of  the  note  at  ma- 
turity, according  to  its  effect.  On  the  24th  of  July,  1867,  more 
than  two  months  before  the  maturity  of  the  note,  Jacob  B.  Car- 
penter, for  a  valuable  consideration,  assigned  the  note  and  mort- 
gage to  B.  Platte  Carpenter,  the  appellant.  The  note  not  being 
paid  at  maturity,  the  appellant  filed  this  bill  against  Mahala 
Longan,  in  the  District  Court  of  Jefferson  County,  Colorado  Ter- 
ritory, to  foreclose  the  mortgage. 

She  answered  and  alleged  that  when  she  executed  the  mortgage 
to  Jacob  B.  Carpenter  she  also  delivered  to  him  certain  wheat  and 
flour,  which  he  promised  to  sell,  and  to  apply  the  proceeds  to  the 
payment  of  the  note;  that  at  the  maturity  of  the  note  she  had  ten- 
dered the  amount  due  upon  it,  and  had  demanded  the  return  of 
the  note  and  mortgage  and  of  the  wheat  and  flour,  all  which  was 
refused.  Subsequently  she  filed  an  amended  answer,  in  which  she 
charged  that  Jacob  B.  Carpenter  had  converted  the  wheat  and 
flour  to  his  own  use,  and  that  when  the  appellant  took  the  assign- 
ment of  the  note  and  mortgage,  he  had  full  knowledge  of  the  facts 
touching  the  delivery  of  the  wheat  and  flour  to  his  assignor.  Testi- 
mony was  taken  upon  both  sides.  It  was  proved  that  the  wheat 
and  flour  were  in  the  hands  of  Miller  &  Williams,  warehousemen, 
in  the  city  of  Denver,  that  they  sold,  and  received  payment  for  a 
part,  and  that  the  money  thus  received  and  the  residue  of  the  wheat 
and  flour  were  lost  by  their  failure.  The  only  question  made  in 
the  case  was,  upon  whom  this  loss  should  fall,  whether  upon  the 
appellant  or  the  appellee.    The  view  which  we  have  taken  of  the 


554  ASSIGNMENT    OF    MORTGAGE 

case  renders  it  unnecessary  to  advert  more  fully  to  the  facts  relat- 
ing to  the  subject.  The  District  Court  decreed  in  favor  of  the  ap- 
pellant for  the  full  amount  of  the  note  and  interest.  The  Supreme 
Court  of  the  Territory  reversed  the  decree,  holding  that  the  value 
of  the  wheat  and  flour  should  be  deducted.  The  complainant 
thereupon  removed  the  case  to  this  court  by  appeal. 

It  is  proved  and  not  controverted  that  the  note  and  mortgage 
were  assigned  to  the  appellant  for  a  valuable  consideration  before 
the  maturity  of  the  note.  Notice  of  anything  touching  the  wheat 
and  flour  is  not  brought  home  to  hun. 

The  assignment  of  a  note  underdue  raises  the  presumption  of 
the  want  of  notice,  and  this  presumption  stands  until  it  is  overcome 
by  sufficient  proof.  The  case  is  a  different  one  from  what  it  would 
be  if  the  mortgage  stood  alone,  or  the  note  was  non-negotiable,  or 
had  been  assigned  after  maturity.  The  question  presented  for  our 
determination  is,  whether  an  assignee,  under  the  circumstances  of 
this  case,  takes  the  mortgage  as  he  takes  the  note,  free  from  the 
objections  to  which  it  was  liable  in  the  hands  of  the  mortgagee. 
We  hold  the  affirmative.  (Powell  on  Mortgages,  908;  1  Hilliard  on 
Mortgages,  572;  Coote  on  Mortgages,  304;  Reeves  v.  Scully,  Walk- 
er's Chancery,  248;  Fisher  v.  Otis,  3  Chandler,  83;  Martineau  v. 
McCollum,  4  id.  153;  Bloomer  v.  Henderson,  8  Mich.  395;  Potts  v. 
*Blackwell,  4  Jones,  58;  Cicotte  v.  Gagnier,  2  Mich.  381;  Pierce  v. 
Faunce,  47  Maine,  507;  Palmer  v.  Yates,  3  Sandford,  137;  Taylor 
V.  Page,  6  Allen,  86;  Croft  v.  Punster,  9  Wis.  503;  Cornell  v.  Hitch- 
ens,  11  id.  353.)  The  contract  as  regards  the  note  was  that  the 
maker  should  pay  it  at  maturity  to  any  bona  fide  indorsee,  with- 
out reference  to  any  defences  to  which  it  might  have  been  hable  in 
the  hands  of  the  payee.  The  mortgage  was  conditioned  to  secure 
the  fulfilment  of  that  contract.  To  let  in  such  a  defence  against 
such  a  holder  would  be  a  clear  departure  from  the  agreement  of  the 
mortgagor  and  mortgagee,  to  which  the  assignee  subsequently, 
in  good  faith,  became  a  party.  If  the  mortgagor  desired  to  reserve 
such  an  advantage,  he  should  have  given  a  non-negotiable  instru- 
ment. If  one  of  two  innocent  persons  must  suffer  by  a  deceit,  it 
is  more  consonant  to  reason  that  he  who  "puts  trust  and  con- 
fidence in  the  deceiver  should  be  a  loser  rather  than  a  stranger." 
{Hern  v.  Nichols,  1  Salkeld,  289.) 

Upon  a  bill  of  foreclosure  filed  by  the  assignee,  an  account  must 
be  taken  to  ascertain  the  amount  due  upon  the  instrument  secured 
by  the  mortgage.  Here  the  amount  due  was  the  face  of  the  note 
and  interest,  and  that  could  have  been  recovered  in  an  action  at 


CARPENTER    V.    LONGAN  555 

law.  Equity  could  not  find  that  less  was  due.  It  is  a  case  in  which 
equity  must  follow  the  law.  A  decree  that  the  amount  due  shall 
be  paid  within  a  specified  time,  or  that  the  mortgaged  premises 
shall  be  sold,  follows  necessarily.  Powell,  cited  supra,  says:  "But 
if  the  debt  were  on  a  negotiable  security,  as  a  bill  of  exchange  col- 
laterally secured  by  a  mortgage,  and  the  mortgagee,  after  payment 
of  part  of  it  by  the  mortgagor,  actually  negotiated  the  note  for 
the  value,  the  indorsee  or  assignee  would,  it  seems,  in  all  events, 
be  entitled  to  have  his  money  fi'om  the  mortgagor  on  liquidating 
the  account,  although  he  had  paid  it  before,  because  the  indorsee 
or  assignee  has  a  legal  right  to  the  note  and  a  legal  remedy  at  law, 
which  a  court  of  equity  ought  not  to  take  from  him,  but  to  allow 
him  the  benefit  of  on  the  account." 

A  different  doctrine  would  involve  strange  anomalies.  The  as- 
signee might  file  his  bill  and  the  court  dismiss  it.  He  could  then 
sue  at  law,  recover  judgment,  and  sell  the  mortgaged  premises  un- 
der execution.  It  is  not  pretended  that  equity  would  interpose 
against  him.  So,  if  the  aid  of  equity  were  properly  invoked  to 
give  effect  to  the  lien  of  the  judgment  upon  the  same  premises 
for  the  full  amount,  it  could  not  be  refused.  Surely  such  an  ex- 
crescence ought  not  to  be  permitted  to  disfigure  any  system  of 
enlightened  jurisprudence.  It  is  the  policy  of  the  law  to  avoid 
circuity  of  action,  and  parties  ought  not  to  be  driven  from  one 
forum  to  obtain  a  remedy  which  cannot  be  denied  in  another. 

The  mortgaged  premises  are  pledged  as  security  for  the  debt. 
In  proportion  as  a  remedy  is  denied,  the  contract  is  violated,  and 
the  rights  of  the  assignee  are  set  at  naught.  In  other  words,  the 
mortgage  ceases  to  be  security  for  a  part  or  the  whole  of  the  debt, 
its  express  provisions  to  the  contrary  notwithstanding.  The  note 
and  mortgage  are  inseparable;  the  former  as  essential,  the  latter 
as  an  incident.  An  assignment  of  the  note  carries  the  mortgage 
with  it,  while  an  assignment  of  the  latter  alone  is  a  nullity.  {Jack- 
son V.  Blodget,  5  Cowen,  205;  Jackson  v.  Willard,  4  Johnson,  43.) 

It  must  be  admitted  that  there  is  considerable  discrepancy  in 
the  authorities  upon  the  question  under  consideration.  In  Baily  v. 
Smith  et  al.,  14  Ohio  State,  396 — a  case  marked  by  great  ability  and 
fulness  of  research — the  Supreme  Court  of  Ohio  came  to  a  conclu- 
sion different  from  that  at  which  we  have  arrived.  The  judgment 
was  put  chiefly  upon  the  ground  that  notes  negotiable  are  made 
so  by  statute,  while  there  is  no  such  statutory  provision  as  to  mort- 
gages, and  that  hence  the  assignee  takes  the  latter,  as  he  would 
any  other  chose  in  action,  subject  to  all  the  equities  which  subsisted 


556  ASSIGNMENT   OF    MORTGAGE 

against  it  while  in  the  hands  of  the  original  holder.    To  this  view 
of  the  subject  there  are  several  answers. 

The  transfer  of  the  note  carries  with  it  the  security,  without  any 
formal  assignment  or  delivery,  or  even  mention  of  the  latter.  If 
not  assignable  at  law,  it  is  clearly  so  in  equity.  When  the  amount 
due  on  the  note  is  ascertained  in  the  foreclosure  proceeding,  equity 
recognizes  it  as  conclusive,  and  decrees  accordingly.  Whether  the 
title  of  the  assignee  is  legal  or  equitable  is  immaterial  The  result 
follows  irrespective  of  that  question.  The  process  is  only  a  mode 
of  enforcing  a  lien. 

All  the  authorities  agree  that  the  debt  is  the  principal  thing  and 
the  mortgage  an  accessory.  Equity  puts  the  principal  and  ac- 
cessory upon  a  footing  of  equality,  and  gives  to  the  assignee  of  the 
evidence  of  the  debt  the  same  rights  in  regard  to  both.  There  is 
no  departure  from  any  principle  of  law  or  equity  in  reaching  this 
conclusion.  There  is  no  analogy  between  this  case  and  one  where 
a  chose  in  action  standing  alone  is  sought  to  be  enforced.  The 
fallacy  which  lies  in  overlooking  this  distinction  has  misled  many 
able  minds,  and  is  the  source  of  all  the  confusion  that  exists.  The 
mortgage  can  have  no  separate  existence.  When  the  note  is  paid 
the  mortgage  expires.  It  cannot  survive  for  a  moment  the  debt 
which  the  note  represents.  This  dependent  and  incidental  rela- 
tion is  the  controlling  consideration,  and  takes  the  case  out  of 
the  rule  applied  to  choses  in  action,  where  no  such  relation  of  de- 
pendence exists.    Accessorium  non  ducit,  sequitur  principale. 

In  Pierce  v.  Faunce,  47  Maine,  513,  the  court  say:  "A  mortgage 
is  pro  tanto  a  purchase,  and  a  bona  fide  mortgagee  is  equally  entitled 
to  protection  as  a  bona  fide  grantee.  So  the  assignee  of  a  mortgage 
is  on  the  same  footing  with  the  bona  fide  mortgagee.  In  all  cases 
the  reliance  of  the  purchaser  is  upon  the  record,  and  when  that 
discloses  an  unimpeachable  title  he  receives  the  protection  of  the 
law  as  against  unknown  and  latent  defects." 

Matthews  v.  Wallwyn,  4  Vesey,  126,  is  usually  much  relied  upon 
by  those  who  maintain  the  infirmity  of  the  assignee's  title.  In  that 
case  the  mortgage  was  given  to  secure  the  payment  of  a  non- 
negotiable  bond.  The  mortgagee  assigned  the  bond  and  mortgage 
fraudulently  and  thereafter  received  large  sums  which  should  have 
been  credited  upon  the  debt.  The  assignee  sought  to  enforce  the 
mortgage  for  the  full  amount  specified  in  the  bond.  The  Lord 
Chancellor  was  at  first  troubled  by  the  consideration  that  the  mort- 
gage deed  purported  to  convey  the  legal  title,  and  seemed  inclined 
to  think  that  might  take  the  case  out  of  the  rule  of  liabihty  which 


TRUSTEES   OF    UNION    COLLEGE    V.    WHEELER  OO/ 

would  be  applied  to  the  bond  if  standing  alone.  He  finally  came  to 
a  different  conclusion,  holding  the  mortgage  to  be  a  mere  security. 
He  said,  finally:  "The  debt,  therefore,  is  the  principal  thing;  and 
it  is  obvious  that  if  an  action  was  brought  on  the  bond  in  the  name 
of  the  mortgagee,  as  it  must  be,  the  mortgagor  shall  pay  no  more 
than  what  is  really  due  upon  the  bond;  if  an  action  of  covenant 
was  brought  by  the  covenantee,  the  account  must  be  settled  in 
that  action.  In  this  court  the  condition  of  the  assignee  cannot  be 
better  than  it  would  be  at  law  in  any  mode  he  could  take  to  re- 
cover what  was  due  upon  the  assignment."  The  principle  is  dis- 
tinctly recognized  that  the  measure  of  liabihty  upon  the  instru- 
ment secured  is  the  measure  of  the  liability  chargeable  upon  the 
security.  The  condition  of  the  assignee  cannot  be  better  in  law 
than  it  is  in  equity.  So  neither  can  it  be  worse.  Upon  this  ground 
we  place  our  judgment.  We  think  the  doctrine  we  have  laid  down 
is  sustained  by  reason,  principle,  and  the  greater  weight  of  au- 
thority. 

Decree  reversed} 


TRUSTEES   OF   UNION   COLLEGE  v.   WHEELER 

Commission  of  Appeals  of  New  York,  1874 

(61  A'.  Y.  88)  - 

Appeal  from  so  much  of  the  judgment  of  the  General  Term  of 
the  Supreme  Court,  in  the  fourth  judicial  department,  as  affirms 
in  part  a  judgment  dismissing  the  plaintiff's  complaint,  entered  on 
the  report  of  the  referee.  (Reported  below  5  Lans.  160;  59  Barb. 
385.) 

This  action  was  brought  to  foreclose  a  mortgage  executed  by 
Philo  Stevens  to  Benjamin  Nott,  to  secure  the  payment  of  $2,800. 
It  bears  date  July  18th,  1833,  and  was  recorded  August  8th,  1833. 
It  covered,  when  given,  four  pieces  of  land,  viz. :  three  in  the  then 

^Fisher  v.  Otis,  3  Chand.  (Mich.)  v.    Twogood,    18   Iowa,    .515    (1865); 

83  (1850);  Dutton  v.  Ives,  5  Mich.  515  Elias  Bremng  Co.  v.  Boeger,  74  Misc. 

(1858);    Croft    v.    Bunster,    9    Wis.  (N.  Y.)  547  (1911). 

503  (1859);  Gould  v.  Marsh,  1  Hun.  ^  xhe  report  of  this  case  is  much 

(N.  Y.)  566  (1874);  Di^ncfflnv.  Louis-  abbreviated,    the    opinion   of    Lott, 

ville,     13    Bush    (Ky.)    378    (1877);  Ch.  C,  and  considerable  portions  of 

Bassett    v.    Daniels,    136    Mass.    547  the  opinions  of  Dwight,   C,   being 

(1884);  Paige  v.  Chapman,  58  N.  H.  omitted. 
333  (1878),  accord.    But  see  Franklin 


558  ASSIGNMENT   OF    MORTGAGE 

village  of  Oswego  and  a  large  tract  in  the  town  Scriba.  The 
mortgage  was  assigned  by  Nott  to  the  plaintiff  by  an  asssignment 
bearing  date  the  1st  day  of  July,  1834,  which  was  recorded  on  the 
25th  day  of  December,  1852. 

The  complaint,  after  stating  the  above  facts,  further  states  that 
a  portion  of  the  mortgaged  premises,  being  two  of  the  parcels  of 
land  in  Oswego,  had  been  released  from  the  lien  of  the  mortgage, 
and  as  to  them  the  plaintiff  made  no  claim,  but  alleged  that  the 
residue  remained  subject  thereto. 

Several  of  the  defendants  answered  and  set  up  that  they  were 
owners  of  different  portions  of  the  lands  lying  in  Scriba,  which 
they  claimed  were  not  subject  to  the  lien  of  the  plaintiff's  mortgage, 
having  been  discharged  by  the  transactions  referred  to  in  the  opin- 
ions. The  issues  were  referred  to  a  referee,  who  dismissed  the  plain- 
tiff's complaint. 

The  General  Term  on  appeal  reversed  the  judgment,  so  far  as 
it  related  to  most  of  the  mortgaged  premises,  but  affirmed  it  as  to 
the  residue.  The  further  facts  are  set  forth  at  length  in  the  opin- 
ions. 

DwiGHT,  C.  The  facts  of  this  case  show  that  on  October  1st, 
1828,  one  Mellen  conveyed  a  large  tract  of  land,  including  the  prem- 
ises in  question,  to  Chauncey  B.  Aspinwall.  The  consideration  for 
the  land  was  paid  by  Aspinwall,  Phila  Stevens  and  Benjamin  Nott, 
in  equal  portions,  and  each  was  equally  interested  in  the  property. 

Aspinwall,  by  deed  bearing  date  January  26,  1830,  conveyed  an 
undivided  two-thirds  part  of  the  property  to  Stevens,  for  the  con- 
sideration of  $2,000.  While  Aspinwall  held  the  property  he 
executed  contracts  of  sale  of  portions  of  the  land  to  a  number  of 
distinct  purchasers,  in  his  own  name,  for  the  benefit  of  himself  and 
Stevens  and  Nott,  to  whom  he  accounted  from  time  to  time  for  the 
proceeds  of  sales.  After  the  conveyance  to  Stevens  sales  were 
made  of  other  portions,  the  contracts  being  executed  by  Aspinwall 
and  Stevens,  and  the  proceeds  being  accounted  for  to  Nott,  as 
before. 

While  matters  stood  in  this  condition,  Nott,  by  a  quit-claim  deed  - 
dated  July  18,  1833,  in  consideration  of  one  dollar,  conveyed  to 
Stevens  all  the  lands  described  in  the  deed  from  Mellen  to  Aspin- 
wall, and  also  village  lots  in  Oswego,  of  which  two-thirds  belonged  • 
to  Nott  and  one-third  to  Stevens.  Stevens,  by  mortgage  bearing 
date  the  same  day  with  the  last  mentioned  deed,  mortgaged  to  Nott 
the  property  conveyed  to  Aspinwall  by  Mellen,  whether  under  con- 


TRUSTEES    OF    UNION    COLLEGE    V.    WHEELER  o59 

tract  or  not,  and  also  the  village  property  above  referred  to,  to 
secure  the  payment  of  $2,800,  with  interest  semi-annually.  The 
mortgage  was  paj'able  in  five  years  from  date,  was  accompanied  by 
Stevens'  bond,  and  dulj^  recorded  August  8,  1833. 

The  bond  and  mortgage  were  assigned  to  the  plaintiff  July  1, 
1834,  for  the  sum  of  $2,790.87,  which  was  then  paid  to  Nott.  The 
execution  of  the  assignment  was  proved  by  a  subscribing  witness, 
December  17,  1853,  and  the  assignment  recorded  on  the  twentieth 
of  the  same  month  and  j^ear.  While  the  mortgage,  in  form,  covered 
the  entire  property  sold  to  Aspinwall,  yet  it  was  conceded,  on  the 
trial,  that  some  portions  of  it  had  been  actually  conveyed  before  the 
execution  of  the  mortgage,  and  to  this  no  claim  was  made  by  the 
plaintiff. 

It  will  be  observed,  from  the  facts  already  detailed,  that  upward 
of  nineteen  years  elapsed  between  the  execution  of  the  assign- 
ment and  its  record.  Within  this  period,  on  March  28,  1836,  Nott, 
still  assuming  to  be  the  owner  of  the  mortgage,  released  to  Stevens 
some  of  the  village  lots  embraced  in  the  mortgage,  who  conveyed 
them  to  purchasers  about  the  time  that  the  releases  were  executed. 
It  appeared  that  the  lots  so  released  were  more  than  sufficient  in 
value,  at  that  time,  to  pay  the  mortgage.  The  purchasers  under 
Stevens  had  no  notice  of  the  assignment  to  the  plaintiff. 

There  is  still  due  and  unpaid  on  the  mortgage  the  principal  sum 
of  $2,800,  with  interest  from  January  1st,  1864,  amounting  on 
December  3d,  1870,  to  $4,157.28. 

The  questions  raised  on  the  present  appeal,  under  this  state  of 
facts  are:  First.  Whether  the  lien  of  the  mortgage  is  superior  to 
the  claims  of  the  purchasers  under  the  contracts.  Second.  If  the 
plaintiff  is  bound  by  the  contracts,  whether  it  is  not  entitled  to  the 
purchase-money  unpaid  upon  them.  Third.  W^hether  the  release 
of  the  village  lots  by  Nott  does  not,  as  between  the  purchasers  and 
the  plaintiff,  discharge  their  lots  from  the  lien  of  the  mortgage? 

1.  In  considering  the  first  question  it  will  be  necessary,  at  the 
outset,  to  examine  the  relations  between  Aspinwall  and  Nott,  as 
well  as  between  the  latter  and  Stevens.  When  Aspinwall  took  the 
title,  the  common  law  of  trusts  was  in  full  operation;  he  undoubt- 
edly held  the  property  as  a  trustee,  both  for  Nott  and  Stevens.  In 
other  words,  the  payment  of  a  portion  of  the  consideration  by  each 
of  these  parties  caused  a  trust  pro  tanto  to  result  in  their 
favor.  This  could  be  proved  by  parol  evidence.  (2  Washburn 
on  Real  Property,  176,  par.  17,  and  cases  cited.)  When  Aspinwall 
conveyed  to  Stevens  he  transferred  an  estate  to  him  charged  with 


560  ASSIGNMENT   OF   MORTGAGE 

a  valid  existing  trust,  of  wliich  Stevens  had  full  knowledge.  Stev- 
ens, according  to  elementary  rules,  became  himself  a  trustee  for 
Nott  to  the  extent  of  the  interest  conveyed  to  him.  (1  Spence's 
Eq.  Jur.  512;  Willis  on  Trustees,  64;  2  Washb.  178,  par.  21.) 

During  the  whole  period  from  October  1,  1828,  to  the  time  of  the 
execution  of  the  mortgage,  the  relation  of  trustee  and  cestui  que 
trust  existed  between  Aspinwall  and  Nott,  or  Stevens  and  Nott. 
These  trustees  were  accountable  to  Nott  in  a  court  of  equity.  They 
had  the  management  of  the  estate,  had  the  legal  power  to  sell,  and 
their  acts  were  acquiesced  in  by  the  cestui  que  trust  and  ratified  by 
the  accountings  held  from  time  to  time.  Under  these  circum- 
stances the  purchasers  under  the  contracts  had  an  equity  superior 
to  that  of  Nott.  At  the  moment  when  he  conveyed  to  Stevens, 
they  could  have  enforced  the  agreements  against  him,  on  payment 
of  the  residue  of  the  purchase-money,  and  against  Stevens,  his 
successor  in  interest.  Nott  and  Stevens  held  the  legal  title,  as 
trustees  for  the  purchasers  under  the  contracts. 

The  sale  by  Nott  to  Stevens  and  the  execution  of  the  mortgage 
to  the  former  worked  no  change  in  this  state  of  things.  At  the 
moment  of  sale  he  was  a  trustee  for  the  purchasers  under  the  con- 
tract. By  a  familiar  rule  in  the  law  of  trusts  he  could  not  buy  or 
sell  to  the  prejudice  of  the  cestuis  que  trusts.  His  sale  to  Stevens, 
and  taking  back  a  mortgage  for  the  purchase-money,  left  him  pre- 
cisely where  he  was  before  the  transaction  was  entered  into — still 
charged  with  the  execution  of  the  trust  in  favor  of  the  purchasers 
under  the  contracts.  It  was,  therefore,  quite  immaterial,  as  far 
as  Nott  was  concerned,  to  show  that  he  had  constructive  notice 
of  the  contracts  by  the  possession  of  the  purchasers.  His  duty 
toward  them  did  not  depend  upon  notice,  but  upon  the  inherent 
equities  of  the  case.  Suppose  that  after  he  had  sold  to  Stevens 
he  had  immediately  repurchased  from  him;  would  he  not  have  been 
subject  to  the  same  equities  as  he  was  liable  to  before  the  sale? 
The  authorities  are  distinct  that  he  would. 

A  mortgage  could  give  him  no  more  rights  than  an  absolute 
purchase.  It  is  thus  clear  that  if  Nott  had  remained  owner  of  the 
mortgage  of  July  18,  1833,  and  had  sought  to  foreclose  it,  he  would 
have  been  bound  by  the  same  equities  as  before  his  sale  of  that  date, 
and  would  have  been  required  to  allow  the  claims  of  the  purchasers 
under  the  contract. 

Does  the  plaintiff  occupy  the  position  of  Nott,  or  can  it  urge  that 
it  is  a  purchaser  in  good  faith,  and  for  value,  and  thus  shut  out  the 
equities  between  the  contractees  and  Nott,  or  is  it  governed  by 


TRUSTEES    OF   UNION    COLLEGE   V.    WHEELER  561 

the  rule  that  the  assignee  of  a  mortgage  takes  subject  to  the  equi- 
ties between  the  original  parties?  According  to  the  reasoning  thus 
far,  this  is  a  case  of  an  inherent  equity  as  between  a  person  having 
an  interest  in  the  equity  of  redemption  and  the  moi-tgage.  The 
mortgage,  in  form,  covers  the  property  claimed  by  the  contractees; 
if  they  do  not  fulfill  the  contract,  it  certainly  embraces  it  in  full. 
What  they  say  to  the  mortgagee  is  this:  "Owing  to  certain  equities 
between  us  and  you,  it  is  inequitable  to  enforce  the  mortgage 
against  property  which,  as  a  matter  of  law,  is  actually  covered  by 
it,  except  you  respect  our  rights." 

Is,  then,  the  plaintiff  in  any  better  position  than  Nott,  the  mort- 
gagee? It  is  well  settled  that  an  assignee  of  a  mortgage  must  take 
it  subject  to  the  equities  attending  the  original  transaction.  If  the 
mortgagee  cannot  himself  enforce  it,  the  assignee  has  no  greater 
rights.  The  true  test  is  to  inquire  what  can  the  mortgagee  do  by 
way  of  enforcement  of  it  against  the  property  mortgaged;  what  he 
can  do  the  assignee  can  do,  and  no  more.  In  Chde  v.  Robison,  2 
J.  R.  612,  the  rule,  as  stated  by  Kent,  Ch.  J.,  is,  that  a  mortgage  is 
liable  to  the  same  equity  in  the  hands  of  the  assignee  that  existed 
against  it  in  the  hands  of  the  obligee.  (2  Vern.  692,  765;  1  Vesey, 
122.)  The  rule  is  not  simply  that  the  assignee  takes  subject  to  the 
equities  between  the  original  parties,  though  that  is  sound  law. 
(Ingraham  v.  Dishorough,  47  N.  Y.  421.)  It  goes  further  than  this, 
and  declares  that  the  purchaser  of  a  chose  in  action  must  always 
abide  by  the  case  of  the  person  from  whom  he  buys.  {Per  Lord 
Thurlow,  in  Davies  v.  Austen,  1  Vesey,  Jr.,  247.)  The  reason  of 
the  rule  is,  that  the  holder  of  a  chose  in  action  cannot  alienate 
anj'^thing  but  the  beneficial  interest  he  possesses.  It  is  a  question 
of  power  or  capacity  to  transfer  to  another,  and  that  capacity  is 
to  be  exactly  measured  by  his  own  rights.  {Beebe  v.  Bank  of  New 
York,  1  J.  R.  552,  per  Spencer,  J.,  and  549,  per  Tompkins,  J.) 
Kent,  Ch.  J.,  in  a  dissenting  opinion  in  the  same  case,  would  have 
confined  the  rule  to  the  equities  between  the  original  parties  to  the 
contract.  {Id.  573.)  The  opinions  of  Spencer  and  Tompkins,  J  J., 
were,  however,  recognized  as  the  correct  exposition  of  the  law  in 
Bush  v.  Lathrop,  22  N,  Y.  535.  A  considerable  number  of  author- 
ities are  cited  by  the  plaintiff  as  tending  to  show  that  the  assignee 
of  a  chose  in  action  is  only  subject  to  the  equities  between  the  con- 
tractor (assignor)  and  the  debtor,  and  not  to  the  so-called  latent 
equities  of  third  persons.  Such  cases  as  James  v.  Morey,  2  Cowen, 
298,  opinion  of  Sutherland,  J.;  Bloomer  v.  Henderson,  8  Mich. 
402;  Mott  V.  Clarke,  9  Barr,  404,  anil  others  of  the  same  class,  were 


562  ASSIGNMENT   OF   MORTGAGE 

reviewed  as  to  their  principle  or  specifically  in  Bush  v.  Lathrop, 
22  N.  Y.  535,  and  repudiated.  The  doctrine  of  Lord  Thurlow,  in. 
England,  and  of  Spencer  and  Tompkins,  JJ.,  already  considered, 
was  thus  adopted  rather  than  that  of  Kent,  Ch.  J.  The  law  of 
some  of  the  other  states  undoubtedly  coincides  with  the  views  of 
Kent,  but,  since  the  decision  in  Bush  v.  Lathrop,  must  be  regarded 
as  without  authority  here. 

The  correct  theory  is  well  stated  in  2  Story  on  Equity  Juris- 
prudence, section  1040:  "Every  assignment  of  a  chose  in  action 
is  considered  in  equity  as  in  its  nature  amounting  to  a  declaration 
of  trust  and  to  an  agreement  to  permit  the  assignee  to  make  use 
of  the  name  of  the  assignor  in  order  to  recover  the  debt  or  to  reduce 
the  property  into  possession."  This  theory  would  lead  to  the  con- 
clusion that  the  action  by  the  assignee  must  be  precisely  commen- 
surate with  that  of  the  assignor,  as  it  must  be  in  his  name  and 
on  the  supposition  that,  for  the  purposes  of  the  action,  he  is  still 
owner.  The  case  of  Dillaye  v.  Commercial  Bank  of  Whitehall,  51 
N.  Y.  345,  is  not  opposed  to  this  view,  as  the  question  in  that  case 
was  not  one  of  the  enforcement  of  a  mortgage,  but  concerned  the 
title  of  the  two  claimants  to  the  ownership  of  the  mortgage  itself. 
The  point  was,  whether  one  who  held  a  mortgage  in  trust,  with  an 
apparently  unrestricted  power  of  disposition,  could  transfer  it  free 
from  the  claims  of  the  cestui  que  trust  to  a  purchaser  in  good  faith. 
It  was  held  that  he  could.  This  case  has  no  tendency  to  estabhsh 
any  right  on  the  part  of  the  assignee  in  enforcing  the  mortgage 
beyond  that  possessed  by  his  assignor. 

The  plaintiff  cites,  to  support  his  view,  authorities  to  the  effect 
that  an  assignee  is  a  purchaser,  and  to  the  effect  that  "a  mortgage 
is  in  form  a  conveyance  of  the  land  and  an  assignment  of  it  is 
another  conveyance  of  the  same  land."  These  cases,  which  are 
very  numerous  in  the  law  books,  refer  only  to  the  position  of  a 
mortgagee  or  assignee  in  a  court  of  law,  and  were  decided  in  Eng- 
land and  in  States  of  the  Union  where  more  technical  views  of  the 
rights  of  a  mortgagee  in  a  court  of  law  prevail  than  in  this  State. 
They  are  of  no  force  in  a  court  of  equity,  in  which  the  case  at  bar 
is  assumed  to  be  pending,  for  in  such  a  tribunal  a  mortgage  is  but 
a  chose  in  action  and  security  for  a  debt.  Reference  is  also  made 
to  a  class  of  cases  appearing  in  the  law  reports  of  a  number  of  the 
States,  holding,  in  substance,  that  when  a  mortgage  is  given  to 
secure  a  negotiable  note,  which  is  itself  transferred  before  maturity 
for  value,  it  is  taken  by  the  assignee  free  from  all  equities.  It  is 
argued  that  these  authorities  tend  to  show  that  the  mortgage  par- 


TRUSTEES    OF    UNION    COLLEGE   V.    WHEELER  563 

takes  of  the  nature  of  the  debt,  in  such  a  sense  that  only  the  direct 
equities  between  the  debtor  and  the  creditor  can  be  set  up  as 
against  the  assignee.  These  cases  have  not  yet  become  estabh'shed 
law  in  this  State.  {Carpenter  v.  Longan,  16  Wall.  [U.  S.]  271; 
Kenicott  v.  Supervisors,  id.  452;  Taylor  v.  Page,  6  Allen,  86;  Croft  v. 
Bunster,  9  Wis.  510.)  If  sound,  they  must  be  made  to  rest  on  rules 
of  law  attending  the  transfer  of  negotiable  paper,  and  cannot 
be  held  by  indirection  to  overthrow  a  rule  concerning  the  ordinary 
bond  and  mortgage  which  has  become  fixed  in  our  jurisprudence. 

The  result  is  that  the  plaintiff  in  the  present  case  takes  subject 
to  the  rights  of  the  purchasers  under  the  contracts,  by  reason  of 
the  equities  between  them  and  Nott  and  without  reference  to  any 
actual  or  even  constructive  notice  of  such  equities  as  between  such 
purchasers  and  the  mortgagee.  .  .  . 

The  judgment  of  the  court  below  should  be  affirmed. 

All  concur. 

A  motion  having  been  made  for  reargument,  the  following  opin- 
ion was  given,  on  denying  the  motion. 

DwiGHT,  C.  The  plaintiff  in  this  cause  moves  for  a  reargument 
on  three  grounds:  First.  That  this  court  erred  in  holding  that  the 
plaintiff  took  the  same  position  in  respect  to  the  mortgage  which 
was  the  subject  of  foreclosure  in  the  present  action  as  its  assignor, 
Nott,  the  mortgagee.  Second.  That  the  court  should  have  held 
that,  where  the  contracts  owned  by  the  respondents  were  assigned 
subsequent  to  the  record  of  the  mortgage,  the  plaintiff  has  a  lien 
for  the  purchase-money  unpaid  at  the  time  of  such  assignment. 
Third.  That  the  court  committed  another  error  in  holding  that 
after  Nott  had  made  the  assignment  and  continued  the  apparent 
owner,  the  assignment  being  unrecorded,  and  the  respondents  hav- 
ing no  notice  of  such  assignment,  his  release  from  the  Hen  of  the 
mortgage  of  certain  portions  of  the  premises  which  were  primarily 
liable  to  pay  the  debt,  was  binding  on  the  plaintiff  and  so  dis- 
charged the  respondents. 

Before  considering  the  first  proposition,  it  will  be  well  to  recall 
the  exact  relations  of  the  parties.  Nott  held  a  mortgage  upon  cer- 
tain lands  to  which  the  mortgagor  held  the  legal  title,  but  which 
in  part  had  been  sold  l)y  a  valid  contract  to  some  of  the  defendants. 
The  validity  of  the  contract  is  undisputed,  as  is  also  the  fact  that 
Nott,  the  mortgagee,  had  full  notice  of  the  equities  of  those  de- 
fendants, an'd  was  bound  in  equity  to  recognize  them. 

Starting  with  this  proposition,  the  counsel  for  the  plaintiff  main- 


564  ASSIGNMENT    OF   MORTGAGE 

tains  that  the  plaintiff,  if  considered  as  a  purchaser  of  a  chose  in 
action  without  notice,  is  not  bound  to  recognize  the  equities  to 
which  Nott  would  have  been  subject;  and  again,  that  it  is  a  pur- 
chaser of  the  legal  title  to  the  land,  and  that  it  can  invoke  the  rule 
that  the  honest  purchaser  of  land  for  a  valuable  consideration 
can  shut  out  any  equities  which  might  have  existed  between 
the  mortgagor,  as  well  those  whom  he  represented,  and  the 
mortgagee. 

In  urging  the  first  branch  of  this  proposition,  he  calls  our  atten- 
tion to  the  supposed  fact  that  the  case  of  Bush  v.  Lathrop,  22  N.  Y. 
535,  and  cited  as  authority  in  one  of  the  opinions  disposing  of  this 
cause,  has  been  overruled,  and  with  it,  that  the  doctrine  on  which 
we  rehed  has  fallen.  This,  however,  is  an  incorrect  assumption, 
for  that  case  has  not  been  overruled  as  a  whole,  but  only  as  to  one 
proposition  maintained  in  it.  See  Moore  v.  Metropolitan  Bk.,  55 
N.  Y.  41.  It  is  there  stated  that  several  propositions  in  Bush  v. 
Lathrop  were  decided  "with  perfect  accuracy."  The  special  point 
in  respect  to  which  there  is  a  conflict  between  the  two  cases  is, 
whether  an  assignor  of  a  chose  in  action  can  set  up  any  equities 
affecting  the  title  between  himself  and  his  assignee,  in  an  action 
brought  by  a  second  assignee.  There  was  no  question  whatever  as 
to  the  equities  growing  out  of  the  chose  in  action  itself,  as  between 
the  original  parties  to  it  or  an  assignee  of  the  creditor.  On  that 
point  the  court  was  careful  to  avoid  all  misconstruction  in  using 
the  following  language:  "The  counsel"  (for  the  defendant)  "fur- 
ther insists  that  to  apply  the  same  rule"  (of  estoppel)  "to  non- 
negotiable  choses  in  action  will  in  effect  make  them  negotiable. 
Not  at  all.  No  one  pretends  but  that  the  purchaser  will  take  the 
fonner,  subject  to  all  defences,  valid  as  to  the  original  parties,  nor 
that  the  mere  possession  is  any  more  evidence  of  title  in  the  pos- 
sessor than  is  that  of  a  horse.  In  both  respects,  the  difference  be- 
tween these  and  negotiable  instruments  is  vital."  (P.  48.)  The 
court  is  also  careful,  on  pages  49,  50  of  the  report,  to  preserve  the 
force  of  the  cases,  decided  by  the  present  Court  of  Appeals,  which 
have  followed  Bush  v.  Lathrop  in  the  respect  referred  to— cases  of 
which  Schafer  v.  Reilly,  50  N.  Y.  61,  is  one,  and  bears  closely  upon 
the  present  discussion.  The  point  in  Moore  v.  Metropolitan  Bank 
is  simply  whether  the  law  of  estoppel  is  applicable  on  the  question 
of  title  as  between  a  first  assignee  and  a  remote  purchaser  of  a  non- 
negotiable  chose  in  action.  It  is  held  that  it  is.  The  rule  that  the 
chose  in  action  itself  is  open  to  all  defenses  growing  out  of  the 
original  transaction,  in  the  hands  of  any  assignee,  no  matter  how 


TRUSTEES   OF    UNION    COLLEGE   V.    WHEELER  565 

remote,  remains  unshaken,  and  must  continue  so  until  elementary 
rules  of  law  are  overthrown. 

The  rule  laid  down  by  us  in  the  case  at  bar  is  distinctly  stated 
and  affirmed  in  Schafer  v.  Reilly,  50  N.  Y.  61.  It  is  there  said  that 
one  who  takes  an  assignment  of  a  mortgage  takes  it  subject  not 
only  to  any  latent  equities  that  exist  in  favor  of  the  mortgagor, 
but  also  subject  to  the  like  equities  in  favor  of  third  persons.  This 
case  emphatically  approves  of  Bush  v.  Lathrop,  so  far  as  it  holds 
this  point,  and  declares  its  doctrine  to  be  settled  law.  None  of 
the  cases,  we  repeat,  in  which  the  present  Court  of  Appeals  have 
followed  that  case,  are  to  be  regarded  as  overruled  by  Moore  v. 
Metropolitan  Bank,  supra.  It  must  accordingly  be  held  to  be  still 
the  law  of  this  State,  that  the  purchaser  of  a  non-negotiable  chose 
in  action,  secured  by  a  mortgage,  takes  it  subject  to  the  latent 
equities  not  only  of  the  mortgagor  but  of  third  persons. 

The  counsel  of  the  plaintiff,  however,  maintains  that  if  it  be 
conceded  that  this  doctrine  applies  to  the  debt  it  does  not  apply 
to  the  mortgage.  His  argument  is,  that  the  mortgage  itself  creates 
a  legal  estate  in  the  land,  and  that  so  far  as  the  land  is  concerned, 
an  assignee  of  a  mortgage  is  a  purchaser  of  the  legal  estate  for  a 
valuable  consideration,  and  entitled  to  exclude  the  equities.  There 
is  thus,  according  to  this  proposition,  one  rule  for  the  land  and 
another  for  the  debt.  If  the  debt  were  collected  by  action  for  its 
amount  the  equities  would  be  let  in;  if  it  were  collected  by  fore- 
closure of  the  mortgage  they  would  be  shut  out.  This,  if  true,  is 
certainly  an  extraordinary  proposition.  It  is  very  comprehensive 
in  its  nature,  for  it  would  exclude  the  equities  of  the  mortgagor 
as  well  as  the  latent  equities  of  third  persons.  Under  our  com- 
pound system  of  foreclosure  and  of  obtaining  a  personal  judgment 
for  the  deficiency,  there  would  be  one  rule  for  the  first  branch  of 
the  case  and  an  entirely  different  one  for  the  last. 

None  of  the  cases  cited  by  the  counsel,  on  this  motion  for  re- 
argument,  sustain  his  proposition  as  being  part  of  our  law.  They 
have  all  been  examined,  and  it  is  unnecessary  to  consider  them  in 
■detail.  The  point  is  really  decided  against  him  in  Schafer  v. 
Reilly,  supra.  The  contest  in  that  case  concerned  the  right  to 
.surplus  moneys  after  a  foreclosure,  and  was  in  substance  a  ques- 
tion as  to  the  title  to  land,  the  money  standing,  under  the  doctrine 
of  equitable  conversion,  in  the  place  of  land.  It  appeared  that 
there  was  a  second  mortgage,  of  a  fictitious  nature,  made  by  one 
John  Reilly  to  Peter  Reilly,  on  which  nothing  had  been  advanced, 
and  which  was  of  course  incapable  of  enforcement  by  Peter.    This 


566  ASSIGNMENT    OF   MORTGAGE 

was  assigned  to  one  Catherine  M.  Burchard,  who  paid  a  valuable 
consideration,  acting  in  good  faith,  and  upon  an  affidavit  by  the 
mortgagor  that  Peter  Reilly  had  advanced  to  him  the  whole 
amount  of  the  principal  without  abatement,  that  the  whole  sum 
remained  unpaid,  and  that  there  was  no  off-set,  defence  or  counter- 
claim to  the  mortgage.  The  mortgage  was  dated  and  executed 
anterior  to  the  claim  of  one  Griffin,  who  had  acquired,  subse- 
quently, a  mechanic's  lien  upon  the  land,  but  before  Mrs.  Burchard 
became  assignee.  Of  his  rights  at  that  time  she  was  ignorant.  The 
question  was,  who  had,  under  these  circumstances,  the  better 
right  to  the  surplus  moneys,  considered  as  land.  The  court  held 
that,  notwithstanding  the  mortgage  was,  on  its  face,  executed 
prior  to  the  mechanic's  lien,  it  might  be  shown  by  Griffin  that  his 
lien  was  in  existence  when  Mrs.  Burchard  advanced  her  money, 
and  that  his  right  could  not  be  affected  by  the  mortgage.  The 
court  there  broadly  applied  the  rule,  that  if  Griffin's  claim  was  an 
equitable  one  and  latent,  it  could  still  be  set  up  by  him  against  the 
assignee.  The  estoppel  against  John  Reilly,  caused  by  his  af- 
fidavit, had  no  effect  upon  the  rights  of  Griffin.  The  court  rested 
this  decision  on  the  ground  that  though  Griffin's  right  might  be  a 
latent  equity,  yet  the  assignee  must  take  the  mortgage  considered 
as  an  interest  in  the  land,  and  not  merely  the  debt,  subject  to  the 
equity.  The  same  class  of  cases  that  were  relied  upon  by  the 
plaintiff's  counsel  in  the  argument  of  the  present  motion  were 
cited  to  the  court,  as  showing  that  the  assignee  of  the  mortgage 
was  a  purchaser  for  value.  Their  apphcation  to  the  subject  in 
hand  was  denied,  and  the  rule  of  Lord  Thurlow,  in  Davies  v. 
Austen,  1  Ves.  247,  was  pronounced  to  be  the  principle  governing 
the  case.  "A  purchaser  of  a  chose  in  action  must  always  abide  by 
the  case  of  the  person  from  whom  he  buys."  (Schafer  v.  Reilly, 
50  N.  Y.  67,  68.)  This  was  the  precise  ground  on  which  the  case 
at  bar  was  rested. 

The  plaintiff  is  mistaken  in  the  supposition  that  the  present  case 
is  one  merely  of  notice  of  equitable  rights  on  the  part  of  third 
parties  to  Nott,  the  mortgagee,  and,  accordingly,  that  it  is  not 
bound  by  the  notice  under  the  ordinary  doctrines  applied  to  the 
purchaser  in  good  faith,  and  for  a  valuable  consideration,  acquir- 
ing title  to  lands.  On  the  contrary,  the  difficulty  is  that  Nott  took 
his  mortgage,  subject  to  the  older  and  better  title  of  the  contractees. 
To  their  estate  his  mortgage  never  attached  in  equity.  The  land 
belonged  to  them  in  equity,  and  the  most  that  Nott  could  acquire 
under  any  circumstances,  as  against  them,  was  a  lien  for  the  un- 


TRUSTEES    OF   UNION'    COLLEGE    V.    WHEELER  567 

paid  purchase-money.  This  is  not  an  interest  in  the  land  hut  onh' 
in  the  money,  and  to  be  obtained  by  an  assignee  of  Nott  in  no 
manner,  except  by  due  notice  of  the  mortgage  and  assignment 
given  to  the  contractees.  The  plaintiff  simply  acquired  Nott's 
rights,  and  stood  in  his  place,  according  to  Schafer  v.  Reilly,  supra. 
(See  also  Andrews  v.  Torrey,  1  McCarter  [N.  J.]  355.)  The  cases  of 
Jackson  v.  Van  Valkenburgh,  8  Cow.  260;  Jackson  v.  Henry,  10 
J.  R.  185;  Varick  v.  Briggs,  6  Paige,  323;  Fort^Y.  Burch,  5  Den. 
187,  and  others  cited  by  the  appellant,  have  no  application  to 
the  case  at  bar.  Those  and  others  of  the  same  nature  are  either 
cases  of  title  obtained  by  fraud,  or  involve  the  effect  of  notice 
under  the  recording  acts,  or  are  instances  of  mortgages  accompany- 
ing negotiable  notes,  and  declared  to  partake  of  the  character  of 
the  note.  They  are  noticed  and  distinguished  in  Schafer  v.  Reilly; 
supra,  and  it  is  unnecessary  to  spend  time  upon  them. 

It  should  be  added  that,  under  the  rules  of  equity  jurisprudence, 
it  is  essential  that  one  who  claims  to  exclude  an  earlier  equity  must 
show  that  he  is  not  only  a  purchaser,  but  has  acquired  the  legal  es- 
tate. What  evidence  was  there,  in  the  case  at  bar,  that  the  plain- 
tiff had  acquired  the  legal  estate?  The  complaint  merely  alleges 
an  assignment  of  the  debt  and  mortgage  in  writing.  The  referee 
only  finds  an  assignment  in  writing.  There  is  not  a  word  anywhere 
concerning  the  acquisition  of  the  mortgage  by  a  deed  or  other  in- 
strument under  seal.  If  the  mortgagee  had  the  "legal"  estate, 
he  did  not  transfer  it  by  such  an  instrument  as  the  law  requires  to 
transfer  a  freehold  estate  in  land.  The  plaintiff  was,  undoubtedly, 
the  equitable  owner,  by  force  of  the  assignment  of  the  bond  and 
the  mortgage  accompanying  it,  but  that  was  not  enough.  The 
legal  title  must  pass.  (Peabody  v.  Fenton,  3  Barb.  Ch.  451.)  The 
authorities,  to  the  effect  that  a  deed  or  other  mode  of  conveyance 
is  necessary  to  pass  the  legal  estate,  strongly  preponderate.  {Den 
V.  Dimon,  5  Halst.  [N.  J.]  156;  JVarden  v.  Ada77is,  15  Mass.  233; 
Jackson  v.  Myers,  11  Wend.  533,  539;  Morrison  v.  Mendenhall,  18 
Minn.  232;  Cottrell  v.  Adams,  2  Bissell,  351;  Olds  v.  Cummings,  31 
111.  188;  Partridge  v.  Partridge,  38  Penn.  St.  78;  Grahayn  v.  Neivman, 
21  Ala.  497;  Lyford  v.  Ross,  33  Me.  197;  Smith  v.  Kelley,  27  id.  237; 
Givan  v.  Tout,  7  Blackf.  210;  2  Washburn  on  Real  Property  [3d  ed.] 
page  113,  paragraphs  12  and  16,  and  cases  cited.)  Such  cases  as 
Green  v.  Hart,  1  J.  R.  590;  Jackson  v.  Blodget,  5  Cow.  202,  and 
Jackson  v.  Willard,  4  J.  R.  43,  do  not  affect  this  question,  as  the 
matter  of  passing  the  legal  title  to  the  mortgage  was  not  in 
controversy.     Johnson  v.  Hart,  3  J.  Cas.  322,  only  decides  that 


568  ASSIGNMENT   OF   MORTGAGE 

by  the  transfer  of  the  debt  an  equitable  title  to  the  mortgage 
passes. 

It  is,  however,  not  our  intention  to  hold  that  the  legal  estate, 
under  the  present  law  of  this  State,  ever  does  or  can  pass  from  the 
mortgagee  to  the  assignee.  On  the  other  hand,  it  is  now  settled 
law  that  the  mortgage  is  but  a  lien  upon  the  land.  The  mort- 
gagor, both  in  law  and  equity,  is  regarded  as  the  owner  of  the  fee, 
and  the  mortgage  is  a  mere  chose  in  action,  a  security  of  a  personal 
nature.  An  assignment  of  a  mortgage,  in  this  view,  cannot  pass 
the  title.  {Jackson  v.  Myers,  11  Wend.  533,  539;  Kortn'ght  v. 
Cady,  21  N.  Y.,343;  Trimm  v.  Marsh,  54  id.  599,  604;  Stoddard 
V.  Hart,  23  id.  559,  560;  Power  v.  Lester,  id.  527.)  Rules  owing 
their  existence  to  a  contrast  between  law  and  equity,  and  giving 
the  later  holder  of  a  legal  title  a  preference  over  an  earlier  holder  of 
an  equitable  title,  are  not  to  be  applied  to  a  state  of  the  law  so  en- 
tirely different  from  that  which  prevailed  when  the  law  of  mort- 
gages first  originated.  In  other  words,  the  power  of  a  vendee  of 
land  to  convey  to  a  second  purchaser,  so  as  to  shut  out  the  equities 
between  himself  and  the  original  vendor,  is  not  to  be  referred  to 
for  the  purpose  of  ascertaining  the  capacity  of  a  mortgagee  when 
he  makes  an  assignment  of  the  mortgage  to  shut  out  the  equities 
between  himself  and  the  mortgagor,  and  those  whom  the  mort- 
gagor represents.  If  that  rule  were  ever  a  part  of  the  law  of  mort- 
gages, the  development  of  that  branch  of  jurisprudence  in  this 
State  demands  that  it  should  be  discarded.  .  .  . 

The  motion  for  reargument  is  denied. 

All  concur.^ 


MERCHANTS'   BANK   OF  BUFFALO  v.  WEILL 

Court  of  Appeals  of  New  York,  1900 

(163  N.  Y.  486) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  fourth  judicial  department,  entered  May  24, 
1898,  upon  an  order  reversing  a  judgment  in  favor  of  defendant 
entered  upon  a  decision  of  the  court  on  trial  at  an  Equity  Term, 
and  granting  a  new  trial. 

This  was  an  action  to  foreclose  a  bond  and  mortgage  and  to 

lAnd   see    Elias    Brewing   Co.   v.       Boeger,  74  Misc.  (N,  Y.)  547  (1911). 

per  Crane,  J. 


TuERCHANTS'    BANK    OF    BUFFALO    V.    WEILL  569 

recover  judgment  for  a  deficiency  against  the  defendant  Louis 
VV'eill,  as  obligor  upon  the  bond,  if  any  such  should  arise  upon  a 
sale  in  foreclosure. 

The  facts  are  not  in  dispute.  The  firm  of  Thome  &  Angell 
owned  a  plot  of  land  in  the  city  of  Buffalo,  the  legal  title  to  which 
was  vested  in  Angell,  who  held  it  for  the  benefit  of  the  firm.  On 
November  5th,  1890,  Angell  conveyed  the  land  to  Louis  Weill, 
for  the  consideration  of  $8,302,  of  which  the  sum  of  $2,302  was  paid 
in  cash.  The  Imlance  was  secured  to  be  paid  by  the  bond  of  Louis 
Weill,  })y  which  he  bound  himself  to  pay  to  his  grantor,  or  to  his 
representatives  or  assigns,  the  sum  of  $6,000,  with  interest.  As 
collateral  security  for  the  payment  of  the  said  indebtedness  men- 
tioned in  the  bond,  Weill,  at  the  same  time,  executed  a  mortgage 
to  Angell  upon  the  premises  conveyed.  On  January-  23rd,  1891, 
Angell  assigned  the  said  bond  and  mortgage  to  this  plaintiff,  as  a 
collateral  security  for  the  payment  of  any  and  all  promissory  notes 
made  and  indorsed  by  Thorne  &  Angell  and  discounted  or  cashed 
for  them  by  the  plaintiff  and  for  any  and  all  renewals  thereof,  or 
any  part  thereof.  This  assignment  was  duly  recorded  in  the 
proper  office.  At  the  time  of  the  execution  of  the  assignment, 
the  plaintiff  was  the  owner  and  holder  of  commercial  paper  upon 
which  Thorne  &  Angell  were  liable  either  as  makers  or  indorsers. 
This  paper  was  renewed  from  time  to  time  thereafter  and  other 
discounts  were  made  by  the  plaintiff  of  paper,  upon  which  Thorne 
&  Angell  were  liable,  either  as  makers  or  indorsers,  and  their  in- 
debtedness, when  this  action  was  commenced,  largely  exceeded 
the  amount  due  upon  the  mortgage  held  as  security.  Concurrently 
with  the  execution  of  the  bond  and  mortgage  mentioned,  an  agree- 
ment in  writing  was  made  between  Thorne  &  Angell  and  Weill,  by 
the  terms  of  which  it  was  agreed  that  said  Weill  at  an}'  time  within 
two  years  from  the  date  thereof  might  elect  to  reconvey  said  prem- 
ises to  Thorne  &  Angell  and  that,  upon  such  reconveyance,  Thorne 
&  Angell  would  pay  to  Weill  all  moneys  paid  by  him  to  apply 
upon  the  purchase  of  the  land,  together  with  all  interest  paid  by 
him  upon  the  mortgage,  etc.,  and,  further,  would  release  him  from 
every  obligation  incurred  by  him  with  reference  to  the  property. 
This  agreement  was  not  recorded;  nor  was  any  notice  thereof  given 
to,  or  had  by,  the  plaintiff. 

After  the  assignment  to  the  plaintiff  of  the  bond  and  mortgage. 
Weill  was  notified  of  its  having  been  made,  within  a  short  time, 
and  upon  one  occasion,  in  May,  1891,  he  paid  the  interest  at  the 
plaintiff's  bank.    On  April  30th,  1892,  Weill  executed  and  dehvered 


570  ASSIGNMENT   OF   MORTGAGE 

to  Thorne  &  Angell  a  conveyance  of  the  premises  described  in  the 
mortgage  and  Thorne  &  Angell  paid  to  him  all  the  sums  of  money, 
which  they  had  agreed  to  pay  to  him  in  such  event  under  the  agree- 
ment hereinbefore  referred  to.  In  this  conveyance  Thorne  & 
Angell,  the  grantees,  assumed  the  mortgage  which  had  been  given 
and  agreed  to  pay  the  same. 

Weill's  defense  to  the  plaintiff's  complaint  in  foreclosure  was 
based  upon  the  agreement,  which  gave  to  him  the  right  within 
two  years  to  rescind  the  purchase  and  to  reconvey  the  premises  to 
Thorne  &  Angell;  by  which  reconveyance,  as  he  claims,  his  bond 
was  discharged. 

The  case  was  tried  before  the  court  without  a  jury  and  the  trial 
court,  holding  that  Weill's  reconveyance  was  made  in  good  faith 
and  in  pursuance  of  the  contract  made  between  him  and  Thorne  & 
Angell,  reached  the  legal  conclusion  that  Weill  was  not  liable  for 
any  deficiency  which  might  arise  upon  a  sale  of  the  mortgaged 
premises.  Upon  appeal  to  the  Appellate  Dvision,  so  much  of  the 
judgment  entered  at  the  Trial  Term  as  was  in  favor  of  the  defend- 
ant Weill  was  reversed  and  a  new  trial  of  the  action  was  ordered. 
From  that  order  of  reversal,  and  from  the  judgment  entered  there- 
upon, the  defendant  Weill  appealed  to  this  court;  giving  the  usual 
stipulation  for  judgment  absolute  in  the  event  of  affirmance. 

Gray,  J.  The  claim  of  the  appellant  Weill  is  that,  upon  the 
facts,  which  are  uncontroverted,  the  bank  took  an  assignment  of 
the  bond  and  mortgage  from  Thorne  &  Angell,  the  mortgagees, 
subject  to  all  the  equities  attending  the  original  transaction  and 
that  it  must  abide  by  the  case  of  its  assignors;  who  could  not  alien- 
ate anything  but  the  beneficial  interest  which  they  possessed,  and 
who  were  bound, by  the  private  collateral  agreement.  The  doc- 
trine which  he  invokes  is  that  early  asserted  in  Bush  v.  Lathrop, 
(22  N.  Y.  535),  and  which  the  cases  since  then  have  reiterated. 
{Trustees  of  Union  College  v.  Wheeler,  61  N.  Y.  112;  Green  v.  Warn- 
ick,  64  ih.  220;  Bennett  v.  Bates,  94  ib.  354;  Hill  v.  Hoole,  116  ib. 
299.)  They  hold  that  the  assignee  of  a  mortgage  takes  it  subject 
to  all  the  defenses  which  were  valid  between  the  original  parties 
and  this  principle  was  borrowed  from  Lord  Thurlow's  rule  in 
Davies  v.  Austen  (1  Ves.  Jr.  247).  Within  its  legitimate  applica- 
tion, its  correctness  has  not  been  disputed  in  this  court;  but,  be- 
cause of  the  broadness  of  its  intended  application  in  Bush  v.  La- 
throp, it  was  soon  found  necessary  to  place  limitations  upon  the 
authority  of  that  case  in  the  decisions  in  McNeil  v.  Tenth  National 


MERCHANTS     BANK   OF    BUFFALO    V.    WEILL  571 

Bmik  (46  N.  Y.  325),  and  in  Moore  v.  Metropolitan  Nat.  Bank 
(55  ib.  41).  They  overruled  Bush  v.  Lathrop  in  the  application 
of  the  principle  to  its  own  state  of  facts  and  held  that  a  bona  fide 
purchaser  for  value  of  a  non-negotiable  chose  in  action  from  one 
upon  whom  the  owner  has,  by  assignment,  conferred  the  appar- 
ent absolute  ownership,  where  the  purchase  is  made  upon  the 
faith  of  such  apparent  ownership,  obtains  a  valid  title  as  against 
the  real  owner.  The  decision  in  the  latter  case  was  based  upon  the 
doctrine  of  estoppel,  which  will  preclude  the  real  owner  from  assert- 
ing his  title  against  a  bona  fide  purchaser  from  one  upon  whom  he 
has  conferred  apparent  ownership  and  apparent  absolute  authority 
to  convey.  {Green  v.  Warnick,  supra.)  The  doctrine  of  Bu.sh 
V.  Lathrop  was  so  broad  as  to  be  inequitable  in  applying  a  principle 
otherwise  correct  and  undisputed  to  cases  such  as  those  of  shares 
of  corporations,  or  other  personal  property,  where  the  legal  title 
being  capable  of  transfer  by  assignment,  the  true  owner  has 
apparently  conferred  upon  another  the  full  power  of  disposition. 

I  do  not  think  that  the  rule,  upon  which  the  appellant  relies, 
applies  to  the  facts  of  the  present  case,  and  that  it  relates,  as 
Mr.  Justice  Follett  observed  of  it,  in  rendering  the  opinion  which 
prevailed  below,  "to  defenses  arising  out  of  matters  inherent  in 
the  contract  by  which  the  chose  in  action  is  evidenced  and  existing 
before  it  is  assigned."  When  this  assignment  was  made,  there  was 
no  defense  to  the  mortgage.  It  was  a  subsisting  and  valid  obliga- 
tion for  the  amount  expressed  as  owing  by  Weill  and  his  present 
defense  to  the  enforcement  of  his  liability  arises  from  his  exercising 
an  option,  conferred  by  an  unrecorded  and  collateral  agreement, 
to  rescind  the  sale  of  the  property  and  thus  to  be  relieved  from 
the  obligation  growing  out  of  it.  But  this  could  not  be  said  to 
have  been  a  defense  to  the  mortgage  existing  at  the  time  of  its 
assignment;  for  it  was  one  which  was  brought  into  existence  by 
the  mortgagor  at  a  time  subsequent.  Non  constat  that  he  would 
ever  exercise  his  option  to  rescind  under  the  collateral  agreement 
and  whether  he  would  do  so,  would  depend  upon  events,  or  con- 
siderations, subsequently  occurring  and  influencing  its  exercise. 
The  cases,  to  which  the  appellant  refers  us,  are  not  parallel  in 
their  facts  and  I  find  none  which  is.  Generally  with  reference  to 
mortgages,  they  relate  to  defenses  growing  out  of  the  original 
transaction  and  affecting  their  legal  inception  as  liens,  or  as  obliga- 
tions of  the  mortgagor.  I  think  the  rule  was  intended,  and  should 
be  held,  to  apply  to  those  defenses,  legal  or  equitable,  which  were 
available  to  the  mortgagor  at  the  time  of  the  assignment  of  the 


572  ASSIGNMENT    OF   MORTGAGE 

mortgage  and  that  new  equities  arising,  or  defenses  accruing, 
thereafter,  are  not  within  its  application.  The  ordinary  duty  in- 
cumbent upon  the  purchaser  of  a  bond  and  mortgage,  for  his 
protection,  is  to  estop  the  mortgagor,  by  his  formal  declarations 
as  to  the  amount  being  justly  due  and  owing,  from  thereafter 
questioning  his  liability;  but  the  bank  could  never,  in  reason,  have 
anticipated  a  defense  to  an  actual  obligation,  which  was  dependent 
for  its  existence  upon  the  mortgagor's  availing  himself  in  the  future 
of  an  option  conferred  by  a  secret  agreement  made  between  him- 
self and  the  mortgagee.  Had  such  an  agreement  appeared  in  the 
bond  and  mortgage,  the  assignee,  of  course,  would  have  taken  at 
its  risk,  if  at  all. 

When  this  assignment  was  made  the  bond  and  mortgage  were 
actual  obligations,  having  a  valid  inception,  and  if  the  debtor 
chose  not  to  give  public  notice  of  his  private  executory  agreement, 
by  recording,  it  was  certainly  incumbent  upon  him  to  inform  the 
bank,  if  he  proposed  to  avail  himself  of  its  provisions. 

In  my  opinion,  the  plaintiff  was  entitled  to  enforce  the  appel- 
lant's liability  upon  his  bond,  to  its"full  extent,  for  any  deficiency 
arising  upon  a  sale  of  the  mortgaged  premises;  inasmuch  as  it  is 
found  that  Thorne  &  Angell's  indebtedness  was  in  an  amount  in 
excess  of  the  amount  due  upon  the  mortgage  held  as  collateral  to 
the  indebtedness. 

The  judgment  appealed  from  should  be  affirmed,  with  costs. 

Parker,  Ch.  J.,  O'Brien,  Haight,  Landon  and  Werner,  JJ., 
concur;  Martin,  J.,  dissents.    . 


DAVIS  V.  BECHSTEIN 

Court  of  Appeals  of  New  York,  1877 

(69  N.  Y.  440) 

This  was  an  appeal  from  a  judgment  of  the  General  Term  of 
the  Court  of  Common  Pleas  for  the  city  and  county  of  New  York, 
modifying  the  judgment  in  favor  of  plaintiff  entered  upon  a  de- 
cision of  the  court  on  trial  at  Special  Term,  and  as  modified  affirm- 
ing the  same. 

This  action  was  brought  to  have  a  bond  and  mortgage  on  lands 
belonging  to  plaintiff  set  aside  and  cancelled.  The  bond  and  mort- 
gage were  executed  by  plaintiff  and  her  husband  to  Lawrence  A. 
Riley,  and  delivered  to  him  as  an  accommodation,  to  be  used  as 


DAVIS    V.    BECHSTEIN  573 

collateral  security  for  the  payment  of  a  note,  which  he  contem- 
plated getting  discounted,  and  under  an  agreement  with  him  that 
he  should  not  have  it  recorded.  Riley  failed  to  procure  the  dis- 
count and  plaintiff  repeatedl}^  requested  the  return  of  the  bond 
and  mortgage;  Riley  promised  to  return  the  same  from  time  to 
time,  but  failed  to  do  so,  had  the  mortgage  recorded,  and  assigned 
the  bond  and  moi'tgage  for  a  valuable  consideration  to  the  defend- 
ant, Bechstein.  Plaintiff's  husband  was  not  made  a  party  to  this 
action.  It  did  not  appear  that  he  had  any  interest  in  the  real  estate 
covered  by  the  mortgage.  A  judgment  was  entered  in  favor  of 
the  plaintiff,  declaring  the  bond  and  mortgage  in  suit  void,  and 
directing  that  defendant  Bechstein  surrender  and  deliver  up  the 
same.  The  General  Term  modified  this  judgment  so  as  to  declare 
the  bond  and  mortgage  void  only  as  against  plaintiff,  and  that  the 
register  of  the  city  and  county  of  New  York  be  required  to  enter 
upon  the  record  of  the  mortgage  that  it  was  adjudged  void  as 
against  plaintiff,  striking  out  the  provision  in  the  judgment  direct- 
ing the  mortgage  to  be  surrendered  up  and  cancelled. 

Church,  Ch.  J.  Neither  the  decision  in  McNeil  v.  The  Tenth 
National  Bank,  46  N.  Y.  325,  nor  in  Moore  v.  Metropolitan  Nat. 
Batik,  55  N.  Y.  41,  affect  the  question  involved  in  this  case.  Those 
cases  hold  that  the  owner  of  a  chose  in  action  is  estopped  from  as- 
serting his  title  against  a  bona  fide  purchaser  for  value,  who  pur- 
chased upon  the  faith  of  an  apparent  absolute  ownership  by  assign- 
ment, conferred  by  the  owner  upon  the  assignee  and  seller,  but 
neither  of  them  intimated  an  intention  to  interfere  with  the  well 
settled  principle,  that  a  purchaser  of  a  chose  in  action  takes  it  sub- 
ject to  the  equities  between  the  original  parties,  and  that  the 
assignor  can  give  no  better  title  than  he  himself  has.  On  the  con- 
trary, Grover,  J.,  in  the  last  case  declared,  in  answer  to  the  sug- 
gestion that  these  principles  might  be  impaired  by  the  decision, 
that  "no  one  pretends  but  that  the  purchaser  will  take  the  former 
(non-negotiable  choses  in  action)  subject  to  all  defences  valid  as  to 
the  original  parties,  nor  that  the  mere  possession  is  am-  more  evi- 
dence of  title  in  the  possessor  than  is  that  of  a  horse."  It  is  only 
where  the  owner,  by  his  own  affirmative  act,  has  conferred  the 
apparent  title  and  absolute  ownership  upon  another,  upon  the 
faith  of  which  the  chose  in  action  has  been  purchased  for  value, 
that  he  is  precluded  from  asserting  his  real  title,  and  this  conclu- 
sion was  arrived  at  by  the  application  of  the  doctrine  of  estoppel. 

At  the  time  Riley  transferred  the  bond  and  mortgage  to  the 


o74  ASSIGNMEXT   OF   MORTGAGE 

defendant  Beehstein,  as  between  him  and  the  plaintiff,  the  mort- 
gagor, he  had  no  title  or  interest  which  he  could  transfer.  The 
mortgage  was  executed  and  delivered  to  him  as  an  accommoda- 
tion, to  be  used  as  collateral  security  for  the  payment  of  a  note  of 
$2,000,  which  he  contemplated  getting  discounted  at  the  New 
York  National  Exchange  Bank,  and  under  an  agreement  not  to 
have  it  recorded.  He  failed  to  procure  the  discount,  and  the  plain- 
tiff repeatedly  requested  the  return  of  the  bond  and  mortgage,  and 
Riley  promised  to  return  the  same  from  time  to  time.  It  is  very 
clear  that  the  bond  and  mortgage  in  his  hands  were  of  no  value, 
and  that  he  could  not  have  enforced  them,  and  the  defendant, 
when  he  purchased,  occupied  no  better  position.  Riley  could 
not  sell  any  better  title  than  he  had,  which  was  none,  and  the  de-. 
fendant  could  not  acquire  b}^  the  purchase  from  him  any  better 
title.  The  specific  transaction  in  which  the  mortgage  was  to  be 
used  having  failed,  Riley's  possession  and  right  to  the  mortgage 
after  that  was  no  different  than  if  it  had  been  delivered  to  him 
without  any  agreement  for  its  use  at  all.  He  was  then  the  pos- 
sessor of  the  bond  and  mortgage  executed  and  delivered  without 
consideration,  and  without  authority  to  use  it  for  any  purpose. 
I  have  examined  the  evidence  and  am  of  the  opinion  that  it  is 
sufficient  to  sustain  the  findings  of  the  Judge,  and  therefore  the 
findings  are  conclusive.  The  husband  was  not  made  a  party,  and 
a  mis-trial  is  claimed  for  this  reason.  He  had  no  interest,  as  it 
appears,  in  the  real  estate,  and  the  defect  should  have  been  taken 
by  answer  or  demurrer.  Otherwise  it  is  deemed  waived.  (Code, 
§  148.) 

The  General  Term  modified  the  judgment,  so  as  to  preserve  all 
the  rights  of  the  defendant  against  the  husband,  and  he  cannot  in 
any  event  be  injured. 

The  judgment  must  be  affirmed. 

All  concur;  Rapallo,  J.,  not  voting. 

Judgment  affirmed} 

^  West/all  V.  Jones,  23  Barb.  (N.  Y.)  form  of  the  mortgage  itself"  created 

9  (1856),  and  Hill  \.  Hoole,  116  N.  an  estoppel  against  the  mortgagor  and 

Y.  299  (1889),  accord.    But  see  First  those  claiming  under  him.     To  the 

Nat.  Bank  of  Corrij  v.  Stiles,  22  Hun.  same    effect,    see    Commonwealth    v. 

(N.  Y.)  339  (1880),  in  which  it  was  Councils   of   Pittsburgh,    34    Pa.    St. 

held  that  a  mortgage  in  the  usual  496,   520   (1859);  compare  Davis  v. 

form,  given  to  raise  money  for  the  Burr,  9  S.   &   R.   (Pa.)   137  (1822); 

mortgagor,     but     improperly     nego-  McMasters   v.    Wilhelm,   85   Pa.   St. 

tiated  and  assigned  by  the  mortgagee  218  (1877). 
for  his  own  purposes,  "by  the  very 


NEW  YORK  REAL  PROPERTY  LAW  575 

New  Jersey  Gen.  Stat.,  1896.  Mortgages,  §  31  (p.  2108). 
[It  is  enacted]  That  all  mortgages  on  land  in  this  State,  and  all 
covenants  and  stipulations  therein  contained,  shall  be  assignable 
at  law  by  writing,  whether  sealed  or  not,  and  such  assignments 
shall  pass  and  convey  the  estate  of  such  assignor  in  the  mortgaged 
premises,  and  the  assignee  may  sue  thereon  in  his  own  name;  but 
in  such  suit  there  shall  be  allowed  all  just  off-sets  and  other  de- 
fenses against  the  assignor  that  would  have  been  allowed  in  any 
action  brought  by  him  and  existing  before  notice  of  such  as- 
signment. ,  .  . 

§  32.  That  the  clerks  of  the  several  counties  of  this  State  be 
and  they  are  hereby  authorized  to  record  in  suitable  books  to  be 
provided  for  that  purpose  any  assignment  of  any  mortgage  upon 
lands  within  their  respective  counties  .  .  .  ;  and  such  recording 
shall  be  notice,  from  the  time  such  assignment  is  left  for  that 
purpose,  to  all  persons  concerned  that  said  mortgage  is  so  as- 
signed. ... 

§  34.  That  when  any  assignment  hereafter  made  is  not  re- 
corded, as  in  this  act  provided,  any  payments  made  to  the  as- 
signor in  good  faith,  and  without  actual  notice  of  such  assignment, 
and  any  release  of  said  mortgaged  premises  or  any  part  thereof, 
to  a  person  not  having  actual  notice  of  such  assignment,  shall  be 
as  valid  as  if  said  mortgage  had  not  been  assigned. 


New  York  Real  Prop.  Law,  §  324  (1  R.  S.  763,  §  41).  The 
recording  of  an  assignment  of  a  mortgage  is  not  in  itself  a  notice 
of  such  assignment  to  a  mortgagor,  his  heirs  or  personal  representa- 
tives, so  as  to  invalidate,  a  payment  made  by  either  of  them  to  the 
mortgagee. 


CHAPTER  V 

DISCHARGE   OF   MORTGAGE 

Section  I. — Tender  and  Payment 

(a)  In  General 

Lit.  §§  334,  335,  337.  338,  339,  and  Co.  Lit.  209, 
reprinted  at  pages  5-7,  supra. 

Lit.  §  340.  Also,  upon  such  case  of  feoffment  in  morgage,  a 
question  hath  been  demanded  in  what  place  the  feoffor  is  bound  to 
tender  the  money  to  the  feoffee  at  the  day  appointed,  &c.  And 
some  have  said,  upon  the  land  so  holden  in  morgage,  because  the 
condition  is  depending  upon  the  land.  And  they  have  said  that 
if  the  feoff er  be  upon  the  land  there  ready  to  pay  the  money  to  the 
feoffee  at  the  day  set,  and  the  feoffee  be  not  then  there,  then 
the  feoffor  is  quit  and  excused  of  the  payment  of  the  money,  for 
that  no  default  is  in  him.  But  it  seemeth  to  some  that  the  law  is 
contrary,  and  that  default  is  in  him ;  for  he  is  bound  to  seeke  the  fe- 
offee if  he  be  then  in  any  other  place  within  the  realm  of  England. 
As  if  a  man  be  bound  in  an  obligation  of  20  pound  upon  condition 
endorsed  upon  the  same  obligation,  that  if  he  pay  to  him  to  whom 
the  obligation  is  made  at  such  a  day  10  pound,  then  the  obligation 
of  20  pound  shall  lose  his  force,  and  be  holden  for  nothing; 
in  this  case  it  behooveth  him  that  made  the  obligation  to  seek  him 
to  whom  the  obligation  is  made  if  he  be  in  England,  and  at  the  day 
set  to  tender  unto  him  the  said  10  pound,  otherwise  he  shall  for- 
feit the  summe  of  20  pound  comprised  within  the  obligation,  &c. 
And  so  it  seemeth  in  the  other  case,  &c.  And  albeit  that  some  have 
said  that  the  condition  is  depending  upon  the  land,  yet  this  proves 
not  that  the  making  of  the  condition  to  bee  performed,  ought  to 
bee  made  upon  the  land,  &c.,  no  more  then  if  the  condition  were 
that  the  feoffor  at  such  a  day  shall  do  somespeciall  corporall  service 
to  the  feoffee,  not  naming  the  place  where  such  corporall  service 
shall  be  done.  In  his  case  the  feoffor  ought  to  do  such  corporall 
service  at  the  day  limited  to  the  feoffee,  in  what  place  soever  of 
England  that  the  feoffee  be,  if  he  will  have  advantage  of  the  con- 
576 


TENDER   AND    PAYMENT  0/ / 

dition,  &c.  So  it  seemeth  in  the  othet  case.  And  it  seemes  to  them 
that  it  shall  be  more  properly  said  that  the  estate  of  the  land  is 
depending  upon  the  condition,  then  to  say  that  the  condition  is 
depending  upon  the  land,  &c.     Sed  quoere,  &c. 

Co.  Lit.  210.  ''Item,  sur  tiel  case  de  feoffment  en  morgage, 
question  ad  este  demande,  &c."  Here  and  in  other  places,  that  I 
may  say,  once  for  all,  where  Littleton  maketh  a  doubt,  and  setteth 
down  severall  opinions  and  the  reasons,  he  ever  setteth  down  the 
better  opinion  and  his  owne  last,  and  so  he  doth  here.  For  at 
this  day  this  doubt  is  settled,  having  beene  oftentimes  resolved, 
that  seeing  the  money  is  a  summe  in  grosse,  and  collaterall  to  the 
title  of  the  land,  that  the  feoffor  must  tender  the  money  to  the 
person  of  the  feoffee  according  to  the  later  opinion,  and  it  is  not 
sufficient  for  him  to  tender  it  upon  the  land;  otherwise  it  is  of  a 
rent  that  issueth  out  of  the  land.  But  if  the  condition  of  a  bond  or 
feoffment  be  to  deliver  twenty  quarters  of  wheat,  or  twenty  load 
of  timber,  or  such  like,  the  obligor  or  feoffor  is  not  bound  to  carry 
the  same  about  and  seeke  the  feoffee,  but  the  obligor  or  feoffor 
before  the  daj^  must  goe  to  the  feoffee,  and  know  where  he  will 
appoint  to  receive  it,  and  there  it  must  bee  delivered.  And  so 
note  a  diversitie  betweene  money  and  things  ponderous,  or  of 
great  weight.  If  the  condition  of  a  bond  or  feoffment  be  to  make 
a  feoffment,  there  it  is  sufficient  for  him  to  tender  it  upon  the  land, 
because  the  state  must  passe  by  liverie. 

"Deins  le  roialm  d'Engleterre."  For  if  he  be  out  of  the  realme 
of  England  he  is  not  bound  to  seeke  him,  or  to  goe  out  of  the  realme 
unto  him.  And  for  that  the  feoffee  is  the  cause  that  the  feoffor 
cannot  tender  the  money,  the  feoffor  shall  enter  into  the  land  as  if 
he  had  duly  tendered  it  according  to  the  condition. 

Lit.  §  342.  And  therefore  it  will  be  a  good  and  sure  thing  for 
him  that  will  make  such  feoffment  in  morgage,  to  appoint  an  espe- 
cial place  where  the  money  shall  be  payd,  and  the  more  speciall 
that  it  be  put,  the  better  it  is  for  the  feoffor.  As  if  A.  infeoffe  B.  to 
have  to  him  and  to  his  heires,  upon  such  condition  that  if  A.  pay  to 
B.  on  the  Feast  of  Saint  Alichael  the  Arch-Angell  next  comming, 
in  the  cathedral!  church  of  St.  Paul's  in  London,  within  foure 
houres  next  before  the  hour  of  noone  of  the  same  Feast,  at  the 
Rood  loft  of  the  Rood  of  the  North  doore  within  the  same  church, 
or  at  the  tombe  of  Saint  Erkenwald,  or  at  the  doore  of  such  a  chap- 
pell,  or  at  such  a  pillar,  within  the  same  church,  that  then  it  shall  be 
lawfull  to  the  aforesaid  A.  and  his  heires  to  enter,  &c.,  in  this  case 
he  needeth  not  to  seek  the  feoffee  in  an  other  place,  nor  to  bee  in 


578  DISCHARGE    OF   MORTGAGE 

an}^  other  place,  but  in  the  place  comprised  in  the  indenture,  nor  to 
be  there  longer  than  the  time  specified  in  the  same  indenture,  to 
tender  or  pay  the  money  to  the  feoffee,  &c. 

§  343.  Also,  in  such  case,  where  the  place  of  payment  is  limited^ 
the  feoffee  is  not  bound  to  receive  the  payment  in  any  other  place 
but  in  the  same  place  so  limited.  But  yet  if  he  doe  receive  the  pay- 
ment in  another  place,  this  is  good  enough  and  as  strong  for  the 
feoffor  as  if  the  receipt  had  beene  in  the  same  place  so  limited,"  &c. 

§  344.  Also,  in  the  case  of  feoffment  in  morgage,  if  the  feoffor 
payeth  to  the  feoffee  a  horse,  or  a  cup  of  silver,  or  a  ring  of  gold, 
or  any  such  other  thing  in  ful  satisfaction  of  the  money,  and  the 
other  receiveth  it,  this  is  good  enough,  and  as  strong  as  if  hee  had 
received  the  summe  of  money,  though  the  horse  or  the  other  thing 
were  not  of  the  twentieth  part  of  the  value  of  the  sum  of  monej^ 
because  that  the  other  hath  accepted  it  in  full  satisfaction. 

BuRGAiNE  V.  Spurling,  Cro.  Car.  284  (King's  Bench,  1633). 
Ejectment.  All  the  Court  agreed  that  whereas  in  the  principal  case 
the  condition  was  for  the  payment  of  1060Z.  upon  the  first  of  July, 
and  the  payment  was  made  before  the  first  of  July,  viz.,  upon  dec- 
imo  sexto  Junii,  and  an  acceptance  thereof,  it  is  a  good  performance 
of  the  condition.  . 


TiTLEY  V.  Davis,  2  Eq.  Cas.  Abr.  604  (Chancery,  1739).  A. 
mortgages  two  estates,  viz.,  Blackacre  and  Whiteacre,  to  B.,  and 
afterwards  mortgages  Blackacre  to  C.  and  after  that  Whiteacre 
to  D.  The  question  was,  whether  the  Court  can  decree  a  redemp- 
tion of  B.'s  mortgage,  who  was  the  original  mortgagee,  by  propor- 
tionable contributions  of  C.  and  D.,  the  two  puisne  mortgagees. 

And  Lord  Chancellor  [Hardwicke],  after  consideration, 
was  of  opinion  that  the  Court  could  not  decree  such  a  redemption ; 
that  the  original  mortgagee  ought  not  to  be  intangled  with  any 
questions  that  may  arise  among  subsequent  mortgagees;  that  he 
has  a  right  to  be  redeemed  intire  and  not  by  parcels;  and  his  right 
undoubtedly  stood  so  with  regard  to  the  mortgagor,  and  conse- 
quently with  regard  to  the  subsequent  mortgagees;  for  the  mort- 
gagor could  not  hurt  him  by  playing  his  right  into  another's  hands, 
nor  is  there  any  precedent  where  such  a  redemption  was  ever  al- 
lowed.^ 

^Street  v.  Beal,  16  la.  68  (1861);  and  the  authorities  generally,  ac' 
Coffin  V.  Parker.  127  N.  Y.  117  (1891),      cord. 


GIBSON    v.    CREHORE  579 

BROWN  V.   COLE 

High  Court  of  Chancery,  1845 

(14  Sim.  427) 

Bill  to  redeem  a  mortgage  for  a  term  of  years  made  on  the  1st 
of  April,  1844. 

The  proviso  for  redemption  stipulated  that  the  mortgagee  should 
re-assign  the  mortgaged  premises  on  being  repaid  the  money  lent 
on  the  1st  of  April,  1845,  with  interest  in  the  meantime,  by  quart- 
erly payments. 

The  mortgagor,  having  had  an  advantageous  offer  for  the  pur- 
chase of  the  premises  shortly  after  the  mortgage  was  made,  ten- 
dered to  the  mortgagee  the  amount  of  the  principal  and  of  the  in- 
terest up  to  the  1st  of  April,  1845,  together  with  a  re-assignment  of 
the  mortgaged  premises;  but  the  mortgagee  would  neither  accept 
the  money  nor  execute  the  deed;  in  consequence  of  which  the  bill 
was  filed. 

The  defendant  demurred  to  the  bill  for  want  of  equity. 

The  Vice  Chancellor  [Shadwell]  allowed  the  demurrer  on 
the  ground  that  it  was  contrary  to  the  practice  of  the  Court  to  de- 
cree the  redemption  of  a  mortgage  before  the  day  appointed  for 
that  purpose  had  arrived.^ 

GIBSON   V.   CREHORE 

Supreme  Judicial  Court  of  Massachusetts,  1827 

(5  Pick.  146) 

This  was  a  bill  in  equity,  in  which  the  plaintiff,  as  widow  of 
Abraham  Gibson,  claimed  the  right  to  be  let  into  her  dower  in  two 
parcels  of  real  estate  in  Boston,  in  the  occupancy  of  the  defendant. 

The  bill  alleges  that  on  the  10th  of  July,  1816,  A.  Gibson  died, 
leaving  the  plaintiff  his  widow;  that  he  was  then  seised  of  the 
premises,  subject  to  a  mortgage  to  P.  C.  Brooks,  dated  November 
18,  1814,  to  secure  the  payment  of  15,000  dollars  in  two  years  with 
semiannual  interest;  that  his  estate  was  represented  as  insolvent, 
and  that  Brooks  proved  the  debt  before  the  commissioners  of  in- 

1  Ahhe  V.  Goodwin,  7  Conn.  377,  384  (1829),  accord. 


580  DISCHARGE   OF   MORTGAGE 

solvency;  that  the  assets  of  the  estate  were  sufficient  to  pay  90 
cents  on  the  dollar;  that  on  the  26th  of  November,  1817,  the  prem- 
ises were  sold  by  the  administrators,  subject  to  the  mortgage, 
and  were  purchased  by  the  defendant;  that  the  defendant,  as  a 
condition  of  the  sale,  gave  his  bond  to  the  administrators  to  pay, 
take  up,  and  discharge  the  mortgage  as  his  proper  debt,  and  that  he 
entered  under  his  deed  from  the  administrators,  which  contained 
a  stipulation  that  he  should  discharge  the  mortgage;  that  he  after- 
wards, on  the  8th  of  January,  1818,  procured  from  Brooks  an 
assignment  of  the  mortgage  and  diverted  the  assets,  holding  the 
mortgage  as  a  subsisting  incumbrance,  instead  of  discharging  it 
according  to  his  obligation.  The  plaintiff  further  alleges  that,  as 
to  her,  the  assignment  is  inoperative  and  the  mortgage  discharged, 
or  if  not,  that  the  assignment  ought  to  stand  for  so  much  only  as 
would  remain  due  on  the  mortgage  after  deducting  what  the  assets, 
if  properly  applied,  would  have  paid.  She  further  states  that  the 
defendant  pretends  that  her  rights,  if  she  ever  had  any,  were  fore- 
closed by  an  entry  under  the  mortgage  on  the  13th  of  February, 
1818,  and  subsequent  possession,  but  she  avers  that  no  such  right 
of  entry  then  existed  in  the  defendant,  he  having  before  that  time 
conveyed  the  estate  by  deed  of  mortgage  to  one  Parker,  and  the  as- 
signment being  inoperative,  and  that,  if  any  such  right  did  then 
exist,  there  has  been  no  foreclosure,  because  at  the  time  of  the  sup- 
posed entry  the  defendant  was,  and  for  a  long  time  before  had  been, 
in  the  actual  occupancy  of  the  premises,  having  entered  under  his 
deed  from  the  administrators;  that  the  supposed  entry  was  made 
in  the  absence  of  the  plaintiff  and  entirely  without  her  knowledge ; 
that  the  defendant  had  never  given  her  any  notice  of  it,  and  that 
she  was  wholly  ignorant,  until  shortly  before  the  filing  of  her  bill, 
that  the  mortgage  was  treated  as  having  any  force  whatsoever,  and 
that  as  soon  as  it  came  to  her  knowledge  that  it  was  set  up  by  the  de- 
fendant as  a  subsisting  incumbrance,  she  offered  to  redeem  and 
requested  the  defendant  to  state  an  account. 

The  defendant,  in  his  answer,  alleges  that  the  plaintiff  joined 
in  the  execution  of  the  mortgage  and  thereby  released  her  right  of 
dower,  and  he  denies  that  she  is  entitled  to  dower.  He  denies  that 
the  assets  in  the  hands  of  the  administrators  should  have  been  ap- 
plied to  the  payment  of  the  mortgage  debt,  or  that  he  was  bound 
to  see  to  the  application  of  the  assets.  He  admits  that  he  entered 
into  a  bond  to  pay,  take  up,  and  discharge  the  debt  secured  by  the 
mortgage,  so  far  as  to  save  the  intestate's  estate  harmless  from 
the  same,  but  denies  that  he  engaged  to  release  or  extinguish  the 


GIBSON    V.    CREHORE  581 

mortgage,  and  also  denies  that  the  administrators,  in  taking  the 
bond,  represented  in  any  respect  the  plaintiff  in  her  capacitv'  of 
widow,  or  that  the  bond  had  any  reference  to  her  rights  as  widow. 
He  alleges  that  about  the  8th  of  January,  1818,  for  the  sum  of 
16,540  dollars  paid  by  him,  he  procured  an  assignment  of  the 
mortgage,  and  continued  to  hold  it  as  a  valid  security  for  the  orig- 
inal debt  and  interest,  until  it  was  foreclosed  by  virtue  of  an  entry 
made  by  him  on  the  13th  of  February,  1818,  in  the  presence  of  two 
witnesses,  and  a  subsequent  possession  for  three  years;  but  that 
if  the  foreclosure  cannot  be  sustained,  the  whole  amount  of  the 
original  debt,  with  interest  computed  semiannually,  is  still  due 
to  the  defendant,  after  deducting  such  rents  as  he  may  have  re- 
ceived beyond  the  amount  of  repairs.  He  alleges  that  at  the  time 
of  his  entry  for  foreclosure  on  the  13th  of  Februarys  1818,  he  had 
good  right  of  entry  for  the  purpose  of  foreclosing  against  all  per- 
sons, except  Parker,  and  that  the  mortgage  to  Parker,  who  never 
entered  by  virtue  thereof,  has  been  discharged. 
The  opinion  of  the  Court  was  drawn  up  by 

Wilde,  J.  That  the  widow  of  a  mortgagor  is  entitled  to  redeem 
the  mortgage  is  a  necessary  inference  from  the  doctrine  repeatedly 
laid  down  as  the  law  of  Massachusetts,  that  a  widow  is  dowable 
of  an  equity.  It  is  a  familiar  principle  in  courts  of  equity,  that 
every  person  interested  in  an  estate  mortgage  is  entitled  to  re- 
deem; and  this  principle  is  confirmed,  if  it  requires  confirmation, 
by  St.  1798,  c.  77,  by  which  it  is  enacted,  "that  the  mortgagor  or 
vendor,  or  other  persons  lawfully  claiming  under  them,  shall  have 
right  to  redeem."  If  therefore  a  widow  can  lawfully  claim  under 
her  husband,  of  which  there  can  be  no  question,  she  has  a  right  to 
redeem,  by  the  express  words  of  the  statute. 

The  objection,  therefore,  to  the  plaintiff's  right  to  redeem  is 
clearly  unfounded,  unless  it  can  be  maintained  that  a  legal  assign- 
ment of  dower  is  an  essential  requisite  to  complete  her  title.  It  is 
true  that  before  such  assignment  she  cannot  enter  on  any  part  of 
the  land,  for  it  cannot  be  ascertained  in  what  part  her  dower  will 
be  assigned;  nor  can  she  maintain  a  writ  of  entry,  for  her  legal 
right  is  inchoate.  But  an  assignment  of  dower  is  not  necessary  to 
enable  her  to  maintain  a  suit  in  equity  for  the  purpose  of  redeem- 
ing the  mortgage,  because  the  as.signment  of  dower  does  not  af- 
fect her  equitable  right  of  redemption,  and  because  she  has  no 
right  to  demand  such  assignment  as  against  the  mortgagee  l)efore 
she  redeems  the  mortgage.     Nor  is  an  assignment  of  dower  by 


582  DISCHARGE    OF   MORTGAGE 

the  heirs  necessary,  because,  as  will  be  shown  hereafter,  she  could 
not  redeem  a  part  or  parcel  of  the  mortgaged  premises  without 
redeeming  the  residue  also,  if  required  so  to  do  by  the  mortgagee. 
The  assignment  of  dower,  therefore,  is  of  no  importance,  and  is 
not  necessary  to  perfect  her  title  to  redeem  the  mortgage. 

[The  Court  then  proceeds  to  consider  various  objections  to  de- 
creeing a  redemption  by  the  plaintiff,  and  holds,  1st,  that  the 
Court  has  plenary  jurisdiction  to  make  such  a  decree;  2d,  that 
the  assignment  of  the  mortgage  to  the  defendant,  when  he  was  pos- 
sessed of  the  equity  of  redemption,  did  not  operate  as  a  merger 
and  extinguishment  of  the  mortgage;  3d,  that  the  plaintiff  is  not 
entitled  to  have  the  mortgage  discharged  out  of  the  personal  estate 
of  the  intestate;  4th,  that  the  plaintiff,  not  being  a  party  to  the 
bond  of  indemnity  given  to  the  administrators,  cannot  take  ad- 
vantage of  it;  5th,  that  the  entry  and  possession  of  the  defendant 
*  are  not  sufficient  in  law  to  foreclose  the  mortgage;  and  proceeds 
as  follows: — 

Considering,  then,  that  the  plaintiff's  right  to  redeem  is  not  ex- 
tinguished by  the  defendant's  entry  and  possession  under  the 
mortgage,  we  are  to  decide  upon  what  terms  and  to  what  extent 
she  is  now  entitled  to  redeem. 

As  the  defendant  has  purchased  the  equity,  as  well  as  the  mort- 
gage, it  would  seem  equitable  to  allow  the  plaintiff  to  redeem  a 
third  part  of  the  mortgaged  premises,  by  paying  her  equitable 
portion  of  the  mortgage  debt,  according  to  the  value  of  her  right 
of  dower  as  compared  with  the  residue  of  the  estate.  But  this  can- 
not be  done  without  infringing  the  defendant's  rights  as  assignee 
of  the  mortgage.  He  stands  in  the  place  of  the  mortgagee,  and 
has  an  undoubted  right  to  insist  on  his  v/hole  debt.  Nor  can  he 
be  compelled  to  be  redeemed  by  parcels,  for  by  thus  dividing  the 
estate  the  income  or  value  of  the  whole  may  be  reduced.  The  rule 
therefore  is,  when  several  are  interested  in  an  equity  of  redemption 
and  one  only  is  willing  to  redeem,  he  must  pay  the  whole  mortgage 
debt;  and  the  others  interested  in  the  equity,  who  refuse  to  re- 
deem, are  not  compellable  to  contribute;  for  it  would  be  unreason- 
able to  compel  a  party  to  redeem,  when  perhaps  it  might  be  for  his 
benefit  to  suffer  the  mortgage  to  be  foreclosed.  The  mortgagee, 
however,  is  not  to  be  entangled  with  any  question  which  may  arise 
between  the  owners  of  the  equity  in  relation  to  contribution,  but 
has  the  right  to  insist  on  an  entire  redemption.  If,  therefore,  sev- 
eral estates  are  mortgaged  by  one  mortgage,  and  the  mortgagor 
afterwards  conveys  the  estates  separately  to  different  persons, 


GIBSON   V.    CREHORE  583 

although  each  owner  of  the  separate  estates  may  redeem,  yet  it 
can  only  be  allowed  by  payment  of  the  whole  mortgage  debt.  And 
the  party  so  redeeming  will  be  entitled  to  hold  over  the  whole 
estate  mortgaged  until  he  shall  be  reimbursed  what  he  has  been 
thus  compelled  to  pay  beyond  his  due  proportion.  He  is  con- 
sidered as  assignee  of  the  mortgage,  and  stands,  after  such  redemp- 
tion, in  the  place  of  the  mortgagee  in  relation  to  the  other  owners 
of  the  equity.  So  if  there  be  tenant  for  Hfe  and  remainderman  of 
an  equity,  either  may  redeem,  but  not  without  paying  the  whole 
mortgage.  In  like  manner  a  dowress  or  jointress  of  lands  mort- 
gaged may  redeem,  she  paying  the  mortgage  debt,  and  may  hold 
over,  if  the  heir  refuses  to  contribute,  until  she  and  her  executor 
shall  be  repaid  with  interest.  (Palmer  v.  Danhy,  Prec.  Ch.  137; 
Saville  v.  Saville,  2  Atk.  463;  Banks  v.  Sutton,  2  P.  Wms.  716; 
Elwys  V.  TJioynpson,  9  Mod.  396;  15  Viner,  447;  Ex  parte  Carter, 
Ambl.  733;  Powell  on  Mortg.  392,  708,  709,  in  notis.) 

If  the  defendant  had  redeemed  the  mortgage,  the  plaintiff 
would  have  been  left  in  by  contributing  her  portion  of  the  mort- 
gage debt,  according  to  the  value  of  her  life  estate  in  one-third 
part  of  the  mortgaged  premises,  in  conformity  with  the  rule 
adopted  in  the  case  of  Swaine  v.  Ferine,  5  Johns.  Ch.  Rep.  482. 
But  as  the  defendant,  being  assignee  of  the  mortgage,  insists  on 
the  payment  of  the  whole  mortgage  debt,  the  plaintiff  cannot  re- 
deem on  any  other  terms.  After  redemption,  she  will  hold  as 
assignee  of  the  mortgage,  but  will  be  bound  to  keep  down  one- 
third  of  the  interest  during  her  life,  and  may  hold  over  for  the 
residue  of  the  mortgage  debt.  The  defendant  must  be  held  to 
account  for  the  rents  and  profits  from  the  time  of  his  entry  under 
the  mortgage;  for  although  this  entry  cannot  operate  by  way  of 
foreclosure,  for  want  of  notice  to  the  plaintiff,  yet  it  is  sufficient 
to  charge  him  with  the  reception  of  the  rents  and  profits. 

The  case  must  be  referred  to  one  of  the  masters  in  chancery  to 
take  an  account  accordingly,  and  redemption  will  be  decreed  upon 
payment  of  the  debt  which  remains  due  on  the  mortgage  after  de- 
ducting the  rents  and  profits. 


584  DISCHARGE    OF   MORTGAGE 

GROVER  V.  FLYE 

Supreme  Judicial  Court  of  Massachusetts,  1863 

(5  Allen,  543) 

Writ  of  Entry.  The  demandants  claimed  title  under  the  levy 
of  an  execution  by  selling  the  equity  of  redemption  of  the  premises. 

At  the  trial  in  the  Superior  Court,  before  Lord,  J.,  it  appeared 
that  at  the  time  the  levy  was  made  the  premises  appeared  on 
record  to  be  subject  to  a  mortgage  to  the  Blackstone  Loan  and 
Fund  Association,  to  secure  certain  sums  of  money,  a  portion  of 
which  was  not  then  due ;  that  full  payment  of  said  sums  had  been 
made  and  a  discharge  of  the  mortgage  and  release  of  the  premises 
by  the  said  association  executed  before  the  levy,  but  the  discharge 
and  release  were  not  recorded  until  afterwards;  and  that  neither 
the  judgment  creditor  nor  the  officer  had  actual  or  constructive 
notice  of  such  discharge  until  the  record  thereof.  The  judge  ruled 
that  it  was  immaterial,  for  the  purposes  of  this  action,  whether 
the  mortgage  upon  the  premises  had  been  discharged,  unless  the 
creditor  or  officer  had  actual  or  constructive  notice  thereof  before 
the  seizure  of  the  land  on  the  execution,  and  that  a  sale  of  the 
equity  without  such  notice  was  regular  and  proper. 

The  ]\iYy  returned  a  verdict  for  the  demandants,  and  the  tenant 
alleged  exceptions. 

BiGEi.ow,  C.  J.  It  is  admitted  that  the  sums  due  on  the  mort- 
gage to  the  Loan  Fund  Association  were  paid  before  the  sale  of 
the  right  in  equity  to  redeem  was  made  by  the  officer;  and  that 
these  payments  were  made  at  or  before  the  times  when  the  several 
instalments  became  due  according  to  the  stipulation  set  forth  in 
the  condition  of  the  mortgage  and  the  bond  which  accompanied  it 
and  formed  part  of  the  transaction.  By  such  payment,  on  familiar 
principles,  the  condition  was  saved  and  the  mortgagor,  the  tenant, 
was  in  of  his  old  estate.  No  conveyance  or  discharge  of  the  mort- 
gage was  necessary  to  revest  the  estate  in  the  mortgagor,  or  to  de- 
feat the  title  of  the  mortgagee.  {Merrill  v.  Chase,  3  Allen,  339, 
and  cases  cited.  Joslyn  v.  Wyman,  ante,  62.)  The  argument, 
therefore,  of  the  demandants,  founded  on  the  necessity  of  record- 
ing a  release  or  discharge  of  a  mortgage  in  order  to  defeat  a  title 
acquired  by  a  judgment  creditor  by  a  sale  on  execution  of  a  right 


EMANUEL    COLLEGE   V.    EWENS  585 

in  equity  made  after  such  release  or  discharge  but  without  actual 
notice  thereof,  falls  to  the  ground.  The  act  of  paj^ment  in  the 
country  ante  vel  apud  diem  saves  the  forfeiture  of  an  estate  held 
by  a  conveyance  defeasible  on  a  condition  subsequent.  No  record 
of  such  an  act  is  necessary  to  make  the  estate  a  fee  simple  estate 
in  the  grantor  or  mortgagor,  as  against  all  persons  claiming  by  a 
subsequently  acquired  title.  The  release  of  the  Loan  Fund  Asso- 
ciation to  the  mortgagor  was  a  useless  and  superfluous  act,  which 
added  nothing  to  the  strength  of  the  title  which  he  had  acquired 
by  a  perforraance  of  the  condition  of  the  mortgage  before  a  breach. 
It  follows  that  the  title  of  the  demandants  under  the  sale  of 
the  right  in  equity  to  redeem  the  estate  is  invalid.  The  premises 
being  unincumbered  and  held  by  the  judgment  debtor  as  an  estate 
in  fee  at  the  time  of  the  service  of  the  execution,  could  be  legally 
levied  on  only  by  an  appraisement,  and  set  off  in  the  mode  pre- 
scribed by  law.  (Forster  v.  Mellen,  10  Mass.  421;  Freeman  v. 
M'Gaiv,  15  Pick.  82;  Perry  v.  Hayward,  12  Cush.  344.) 

Exceptions  sustained.^ 


(b)  After  Default 

Emanuel  College  v.  Ewens,  1  Ch.  Rep.  18  (Chancery,  1625).^ 
That  the  Earl  of  Huntington,  seized  in  fee  of  the  Manor  of  North- 
Cabury,  with  advowson  appendant,  and  for  payment  of  debts 
by  way  of  mortgage,  25  Eliz.,  made  a  lease  for  500  years  of  the 
said  manor,  with  appurtenances,  not  mentioning  the  advowson 
by  express  name,  with  a  clause  of  redemption,  and  for  advance- 
ment of  learning  and  religion,  of  his  free  disposition  in  28  Eliz. 
by  deed  granted  the  said  advowson  to  Sir  Francis  Hastings,  and 
others,  and  their  heirs,  to  the  use  of  the  said  Earl  for  life,  re- 
mainder to  the  Master,  Fellows,  &c.,  of  the  said  college,  and  their 
successors  forever;  and  shortly  after  in  the  same  year  paid  his  said 
debts.  And  this  court  conceived  the  said  lease,  being  but  a  se- 
curity, and  that  money  paid,  the  said  lease  being  void,  as  well 
against  the  said  college  as  against  any  other;  and  though  the  money 
was  not  paid  at  the  day,  but  afterwards,  the  said  lease  ought  to 
be  void  in  equity  as  well  as  on  a  legal  payment,  it  had  been  void  in 
law  against  them. 

'  Compare,     Watson     v.     Wyman,  •  A    portion   only   of    the   case   aa 

161  Mass.  96,  per  Holmes,  J.  reported  is  here  given. 


586  DISCHARGE   OF   MORTGAGE 

Manning  v.  Burges,  1  Ch.  Cas.  29  (The  Rolls,  1663).  A  mort- 
gage was  forfeited;  the  mortgagor  afterwards  meeting  the  mort- 
gagee, said,  "I  have  moneys;  now  I  will  come  and  redeem  the 
mortgage."  The  mortgagee  said  to  him  he  would  hold  the  mort- 
gaged premises  as  long  as  he  could;  and  then  when  he  could  hold 
them  no  longer,  let  the  devil  take  them  if  he  would.  And  after- 
wards the  mortgagor  went  to  the  mortgagee's  house  with  money 
more  than  sufficient  to  redeem  the  mortgage,  and  tendered  it 
there;  but  it  did  not  appear  that  the  mortgagee  was  within,  or  that 
the  tender  was  made  to  him;  and  it  was  decreed  a  redemption,  and 
the  defendant  to  have  no  interest  from  the  time  of  the  tender, 
because  of  his  wilfulness. 


LuTTON  V.  RoDD,  2  Ch.  Cas.  206  (Chancery,  1675).  A  deed 
in  the  nature  of  a  mortgage  and  covenant  to  reconvey  on  pay- 
ment :  the  money  was  tendered  at  the  day  and  place,  and  refused : 
Decreed,  the  money  without  interest  from  the  time  of  the  tender, 
and  to  reconvey,  though  that  the  plaintiff  ought  to  make  oath 
that  the  money  was  kept  and  no  profit  made  of  it.^ 


WILTSHIRE  V.  SMITH 
High  Court  of  Chancery,  1744    • 
(3  Atk.  89) 

A  bill  was  brought  to  redeem  a  mortgage  on  the  8th  of  May, 
1742,  in  which  the  plaintiff  insists  upon  a  redemption  on  paying 
the  principal  money  only,  for  that  the  interest  ought  to  end  the 
20th  of  February,  1741,  because  the  plaintiff  had  given  six  months' 
notice  to  pay  off  the  mortgage,  and  on  that  day  tendered  the 
principal  and  interest  and  a  deed  of  assignment,  but  the  defendant 
absolutely  refused  to  take  the  money. 

The  defendant  swears  that  he  offered  to  take  the  money,  pro- 
vided he  might  have  time  to  consider  of  it  and  to  advise  upon  the 
deed  of  assignment,  as  there  are  covenants  in  it  on  his  part,  upon 
which,  as  he  is  not  of  the  profession  of  the  law  himself,  it  is  reason- 
able he  should  ask  the  opinion  of  some  attorney,  whether  they 
were  such  as  he  might  safely  execute. 

1  Gyles   V.   Hall,   2   P.   Wms.    378       (1864),  and  the  authorities  generally, 
(1726);   Stow  v.   Russell,   36   111.    18      accord. 


WILTSHIRE    V.    SMITH  587 

Lord  Chancellor  [Hardwicke]:  There  is  not  one  case  in 
twenty  upon  the  fact  of  an  absolute  refusal  after  a  tender  that  is 
ever  made  out,  for  they  are  generally  attended  with  circumstances 
that  explain  the  refusal,  and  are  nothing  more  than  causes  cooked 
up  bj^  country  attornies  to  make  themselves  business.  The  plain- 
tiff did  not,  as  he  ought  to  have  done,  send  a  draft  of  the  assign- 
ment to  the  defendant  any  time  before  the  mone}^  was  tendered. 

The  plaintiff  insists  that  the  defendant  absolutely  refused  to 
take  his  money  or  execute  the  deed  of  assignment.  If  this  had 
been  the  fact,  it  would  have  been  unconscionable  and  .unreason- 
able in  the  defendant. 

But  the  person  who  was  to  take  an  assignment  of  the  mortgage 
swears  that  the  defendant  desired  further  time  or  to  that  effect. 
The  question  is.  Who  was  in  the  wrong?  The  plaintiff  certainly 
was.  For  where  there  are  covenants  on  the  part  of  the  mortgagee, 
it  is  very  reasonable  that  he  should  have  some  time  to  look  them 
over;  and  the  plaintiff's  attorney  ought  to  have  left  the  deed  for  a 
week  with  the  defendant,  that  he  might  have  an  opportunity  to 
advise  upon  it,  and  the  plaintiff's  attorney  should  have  appointed 
a  time  to  pay  the  money  after  the  defendant  had  been  allowed  a 
sufficient  time  to  advise;  or,  as  I  said  befor^,  he  should  have  sent  a 
copy  or  the  ingrossment  of  the  assignment. 

But  the  subsequent  transaction  and  what  passed  before  the 
filing  of  the  bill  explains  it.  Did  ever  a  mortgagor,  as  is  the  case 
here,  after  he  was  put  under  this  difl&culty,  lie  by  a  year  and 
quarter  without  bringing  a  bill  to  redeem?  What  could  be  the 
reason?  Why,  the  plaintiff,  the  mortgagor's  attorney,  told  him, 
You  have  made  a  tender  of  your  mortgage  money,  and  the  defend- 
ant's refusal  has  forfeited  his  interest;  for  that  you  may  keep  the 
money,  and  by  a  bill  compel  the  defendant  to  take  the  principal, 
without  interest,  from  the  time  of  the  tender. 

Lord  Hardwicke  ordered  that  it  be  referred  to  a  master  to  take 
an  account  of  what  was  due  to  the  defendant  for  principal,  interest 
and  costs  on  the  mortgage,  and  on  the  plaintiff's  paying  to  the  de- 
fendant what  the  Master  shall  certify  to  be  due  within  six  months 
after  he  has  made  his  report,  it  was  decreed  the  defendant  should 
assign  the  mortgaged  premises,  as  the  Master  should  direct;  but 
in  default  of  the  plaintiff's  paying  as  above  directed,  it  was  ordered 
the  plaintiff's  bill  do  stand  dismissed. 


588  DISCHARGE    OF   MORTGAGE 

MAYNARD  v.  HUNT 

Supreme  Judicial  Court  of  Massachusetts,  1827 

(5  Pick.  240) 

Writ  of  Entry.  The  defendant  declared  upon  his  seisin  in  fee- 
and  in  mortgage  and  a  disseisin  by  the  tenant. 

The  tenant  pleaded :  First,  niil  disseisin. 

Secondly,  that  Nathaniel  Maynard,  the  mortgagor,  assigned  the 
premises  to  the  tenant,  with  warranty  against  all  incumbrances, 
and  that  the  tenant,  after  condition  broken,  but  before  action  was 
brought,  tendered  $400  for  the  discharge  of  the  mortgage.  The 
demandant  took  issue  on  the  tender. 

Thirdly,  that  in  consideration  that  the  tenant  would  forbear  to 
make  the  tender,  the  demandant  promised  that  the  tenant  should 
hold  the  land  discharged  of  the  mortgage,  and  that  he  (the  de- 
mandant) would  resort  to  Nathaniel  Maynard  for  payment  of 
the  note,  which  was  secured  by  the  mortgage.  Issue  was  taken 
on  this  plea. 

Fourthly,  a  plea  like  the  second,  except  that  it  alleged  a  tender 
of  $450.    Issue  was  taken  on  the  tender. 

The  cause  was  tried  before  Putnam,  J.,  and  a  verdict  was  found 
for  the  tenant  upon  all  the  issues. 

The  demandant  thereupon  moved  in  arrest  of  judgment,  be- 
cause the  three  last  issues  were  immaterial,  and  the  first  issue  was 
found  only  for  form's  sake  and  as  a  consequence  of  the  finding  on 
the  other  issues. 

He  further  moved  that  if  any  of  these  three  issues  should  be  ad- 
judged immaterial  the  Court  would  grant  a  new  trial,  because  no 
evidence  had  been  introduced  sufficient  or  proper  to  maintain 
either  of  them  on  the  part  of  the  tenant,  and  because  all  the  evi- 
dence in  the  case,  the  three  last  pleas  and  the  admission  of  the 
tenant's  counsel  show  that  the  finding  of  the  first  issue  for  the 
tenant  was  a  consequence  of  finding  the  other  issues  in  his  favor, 
and  that,  if  that  issue  had  stood  alone,  it  would  have  been  found 
for  the  demandant. 

At  the  trial  J.  W.  Hunt,  the  brother  of  the  tenant,  testified  that, 
at  the  tenant's  request,  he  called  on  the  demandant  and  inquired 
how  much  was  due  upon  the  note.  The  demandant  replied  $400. 
The  witness  asked  him  if  he  intended  to  call  upon  the  tenant  for 
the  land,  if  Nathaniel  Maynard  (who  was  the  defendant's  son) 


MAYNARD    ('.    HUNT  589 

should  be  unable  to  pay  the  note.  He  answered  in  the  affirmative. 
The  witness  said  he  would  pay  him  $400;  that  he  came  for  the 
purpose  of  settling  with  him;  that  he  had  the  money  with  him  in 
bank  bills,  and  that  he  would  get  the  specie  if  it  would  make  any 
difference.  The  demandant  said  it  would  not.  He  also  said  that 
if  he  took  the  money  the  tenant  would  immediately  sue  Nathaniel. 
The  witness  told  him  that  he  could  expect  nothing  else.  The  de- 
mandant then  said  that  he  would  not  take  the  money;  he  would 
rather  it  should  lie  as  it  was  on  interest;  he  was  secure;  but  he 
assured  the  witness  that  his  brother  should  not  be  hurt. 

The  question  whether  this  evidence  was  sufficient  to  warrant 
the  finding  of  the  jury  was  reserved  for  the  determination  of  the 
whole  court. 

Parker,  C.  J.  It  is  very  clear  that  all  the* issues  except  the  first 
are  immaterial,  and  that  the  first  was  found  for  the  defendant 
against  all  the  evidence  in  the  case  which  could  legally  bear  upon 
it.  The  mortgage  deed  produced  by  the  demandant  entitled  him 
to  a  verdict  on  the  first  issue,  there  being  no  payment  or  tender 
of  payment  of  the  money  due,  according  to  the  condition,  until 
four  years  after  the  condition  broken,  so  that  the  demandant's 
title  at  law  was  perfect,  subject  only  to  be  defeated  by  a  process  in 
equity,  founded  upon  payment  or  tender  of  payment  after  condi- 
tion broken  and  before  foreclosure. 

If  judgment  should  be  rendered  on  the  verdict  in  favour  of  the 
tenant,  the  demandant  would  be  entirely  deprived  of  his  security 
and  probably  of  his  debt,  without  any  consideration  or  equivalent, 
for  we  cannot  consider  that  the  loose  conversation  testified  to  by 
the  brother  in  regard  to  his  claims  has  proved  any  intention  to  give 
up  his  security,  or  that  it  can  have  the  effect  of  a  release  or  dis- 
charge of  the  mortgage  in  law  or  in  equity. 

Whether  a  tender  or  any  fact  equivalent  was  proved  is  wholly 
unimportant,  as  the  tenant's  right  at  that  time  subsisted  wholly  in 
equity,  and  he  could  not  otherwise  enforce  it  than  by  a  bill  in 
equity.  The  tenant's  counsel  has  reminded  us  since  the  argument 
that  no  objection  was  taken  at  the  trial  to  the  time  of  the  sup- 
posed tender,  and  he  refers  us  to  the  case  of  Arms  v.  Ashley  (4  Pick. 
71)  to  show  that  it  could  not  afterwards  be  raised.  But  the  cases 
are  wholly  different.  In  the  case  cited  the  point  was  that  a  fact 
capable  of  proof,  but  omitted  to  be  proved  or  called  for  at  the 
trial,  was,  on  the  hearing  of  the  questions  reserved,  stated  as  a 
ground  of  objection  to  the  verdict.    In  his  case  the  point  on  which 


590  DISCHARGE    OF   MORTGAGE 

the  cause  turns  appears  on  the  record  and  in  the  proceedings,  and, 
from  the  tenant's  own  showing,  no  other  evidence  touching  it 
could  have  been  produced  had  the  question  been  made  at  the  trial, 
for  the  tenant's  right  to  tender  it  did  not  exist  until  long  after  the 
tender  could  have  defeated  the  demandant's  title  at  law.  Ad- 
mitting that  payment  tendered  and  received  after  condition  broken 
and  before  foreclosure  would  be  a  sufficient  defence  to  an  action 
brought  by  the  mortgagee  for  possession,  it  would  not  follow 
that  a  tender  not  accepted  would  be.  The  first  might  operate  as  a 
discharge  of  the  debt  and  waiver  of  the  breach  of  the  condition,  and 
it  might  be  unreasonable  to  allow  the  mortgagee  to  recover  pos- 
session, when,  by  another  suit,  he  would  be  immediately  obliged  to 
surrender  it.  But  the  case  of  a  tender  is  different.  The  debt  is  not 
discharged,  and  it  is  only  in  equity  that  the  mortgagor  can  avail 
himself  of  it. 

The  proper  course  in  this  case  is  for  the  plaintiff  to  recover  the 
conditional  judgment,  as  in  the  case  of  mortgage,  unless  the  tenant 
has  a  better  defence  than  is  shown  by  the  report  of  the  case 

Verdict  set  aside  and  new  trial  granted.^ 


KORTRIGHT  v.   CADY 
Court  of  Appeals  of  New  York,  1860 
(21  N.  Y.  343) 

Appeal  from  the  Supreme  Court.  Action  to  foreclose  a  mort- 
gage. 

The  defendant  Cady  was  a  subsequent  grantee  of  the  equity 
of  redemption.  He  averred  in  his  answer,  and  proved  on  the  trial, 
that,  after  the  money  secured  by  the  mortgage  had  become  due  and 
the  stipulated  day  for  payment  had  passed,  he  tendered  to  the  plain- 
tiff the  amount  due  for  principal  and  interest.  The  plaintiff  re- 
fused to  receive  it  unless  Cady  would  also  pay  certain  taxes  upon 
the  mortgaged  premises,  which  the  plaintiff  had  discharged.  It 
was  held  that  Cady  was,  for  reasons  unnecessary  to  be  stated, 
under  no  obligation  to  pay  the  taxes,  and  the  case  stood  upon  the 
naked  tender.  Cady  did  not  in  his  answer  allege  a  readiness  still 
to  pay  the  mortgage  debt,  or  that  it  was  paid  into  court,  nor  did 

^Bowell   V.    Mitchell,    68    Me.    21       (187 &),  accord.    Cf.  Stewart  v.  Crosby, 

50  Me.  130  (1863). 


KORTRIGHT    i'.    CADY  591 

he  offer  to  bring  it  into  court;  and  it  did  not  appear,  from  the  find- 
ing of  facts  or  otherwise,  that  he  in  any  way  kept  the  tender  good. 
The  plaintiff  had  the  usual  judgment  of  foreclosure,  and  for  a 
sale  of  the  mortgaged  premises.  Upon  appeal  by  the  defendant 
Cady,  this  judgment  was  affirmed  at  General  Term  in  the  First 
District;  whereupon  he  appealed  to  this  Court. 

CoMSTocK,  Ch.  J.^  After  the  suit  was  commenced  to  foreclose 
the  mortgage,  Cady,  who  had  become  the  owner  of  the  land,  ten- 
dered the  amount  due,  with  the  costs,  which  being  refused,  he  set 
up  the  tender  in  his  answer,  in  Ijar  of  the  further  maintenance  of 
the  action.  The  only  question  in  the  case  is,  whether  a  tender, 
made  after  a  mortgage  is  due,  by  the  owner  of  the  lands  mortgaged, 
discharges  the  lien. 

Forty  years  ago  this  question  was  fully  determined  by  the  Su- 
preme Court  of  this  State,  in  the  case  of  Jackson  v.  Crafts,  18 
John.  110.  Mr.  Justice  Wood  worth,  in  delivering  the  opinion  of 
the  court,  observed:  ''From  the  nature  of  the  interest  the  mort- 
gagee has,  there  is  no  necessity  of  a  reconveyance  by  h'un  to  the 
mortgagor  after  the  mortgage  has  been  paid.  When  that  is  done, 
the  mortgagee  has  no  title  remaining  in  him  to  convey,  and  conse- 
quently, by  our  laws,  on  pa5niient  of  the  money  he  is  not  deemed 
a  trustee,  holding  the  legal  estate  for  the  benefit  of  the  mortgagor. 
The  only  question,  then,  is,  whether  tender  and  refusal  are  equiv- 
alent to  payment."  Having  thus  truly  stated  the  relation  between 
mortgagor  and  mortgagee,  according  to  the  law  as  it  was  then  and 
has  been  ever  since  well  settled  in  this  State,  he  cited  some  of  the 
early  English  authorities,  holding  that  a  tender  of  the  money  due 
discharged  the  land  from  the  lien. 

[After  discussing  the  decision  in  Merritt  v.  Lambert,  7  Paige,  344, 
and  stating  that  the  Chancellor  in  that  case  was  of  the  opinion 
that  a  mere  tender  unaccepted  after  the  law  day  did  not  discharge 
the  lien  of  the  mortgage,  the  learned  Chief  Judge  .proceeded :] 

In  giving  his  views  upon  the  last  mentioned  question,  the  Chan- 
cellor criticised  the  opinion  of  Judge  Woodworth  in  Jackson  v. 
Crafts  (supra),  for  the  reason  that  the  English  authorities  which 
he  referred  to  related  to  a  tender  on  the  day  when  the  mortgage 
debt  became  due.  (Bac.  Abr.,  tit.  Tender,  F.;  Co.  Lit.,  209  b, 
§338;  20  Viner,  tit.  Tender,  N.,  §4.)  On  this  criticism  I  shall 
make  one  or  two  observations.     By  the  ancient  common  law,  a 

^  The  order  of   the   opinions   has       been    changeil,    and    portions    have 

been  omitted. 


592  DISCHARGE    OF   MORTGAGE 

mortgage  was  a  grant  of  land  defeasible  on  the  condition  subse- 
quent of  paying  the  money  at  the  exact  time  specified.  (1  Powell  on 
Mortgages,  4.)  On  failure  to  perform  that  condition  the  grant 
was  absolute,  and  neither  tender  nor  payment  made  afterwards 
could  have  the  effect  to  revest  the  title.  The  specified  time  of  pay- 
ment was  called  the  law  day,  because  after  default  the  legal  rights 
of  the  mortgagor  were  gone.  The  estate  became  vested  in  the 
mortgagee  absolutely,  because  the  original  grant  was  freed  from 
the  condition.  "For  these  reasons,"  the  Chancellor  himself  re- 
marked, "it  is,  that  the  mortgagor,  or  his  assigns,  or  subsequent 
incumbrancers  upon  the  mortgaged  premises,  are  driven  to  a  bill 
to  redeem,  where  the  mortgagee  refuses  to  receive  what  is  equi- 
tably due  to  him.  But  this  could  not  be  necessary,"  he  added, 
"  if  a  mere  tender  of  the  amount  due  after  the  mortgage  has  become 
forfeited  would  have  the  legal  effect  of  discharging  the  mortgaged 
premises  from  the  lien  of  the  mortgage."  It  is  a  self-evident 
proposition,  which  the  Chancellor  need  not  have  undertaken  to 
prove,  that  when  the  law  was  that  even  payment  after  the  law 
day  would  not  discharge  the  mortgage,  a  mere  tender  could  not 
have  such  an  effect .  He  was  probably  quite  correct  in  saying  that 
the  English  authorities  cited  by  Judge  Woodworth  referred  to 
tender  at  the  day,  because  those  authorities  were  of  a  date  when 
even  payment  after  the  day  did  not  divest  the  estate  or  interest 
of  the  mortgagee.  But  Judge  Woodworth  and  the  eminent  men 
who  sat  with  him  on  the  bench  of  the  Supreme  Court  considered, 
what  the  learned  Chancellor  seems  to  have  failed  to  notice,  the 
fundamental  change  which  the  law  of  mortgage  had  undergone 
long  before  the  decision  in  Jackson  v.  Crafts  was  pronounced. 
In  this  State,  a  mortgage  had  always  been  regarded  as  a  mere 
security  or  pledge  for  the  debt;  and  the  rule  had  always  been  that 
payment  at  any  time  discharged  the  lien,  so  that  no  reconvey- 
ance of  the  estate  was  necessary.  It  seems  to  me,  therefore,  that 
the  authorities  cited  by  the  Supreme  Court,  on  the  effect  of  tender, 
were  extremely  pertinent  to  the  question,  because  they  showed  very 
conclusively  that  a  tender  at  the  law  day  had  the  same  effect  on  the 
mortgage  as  a  payment  on  that  day.  Underlying  this  particular 
proposition,  of  course,  was  the  more  general  doctrine  that  when  a 
certain  effect  nmst  be  given  to  a  payment,  a  tender  will  have  a  like 
effect.  This  was  what  the  Supreme  Court  undoubtedly  meant,  and 
the  authorities  cited  simply  showed  the  application  of  the  principle 
to  the  law  of  mortgage.  The  principle  itself,  or  its  application, 
was  not  questioned  by  the  Chancellor;  but  he  did  not  consider,  so 


KORTRIGHT   V.    CADY  593 

far  as  appears,  that  the  rule  had  become  entirely  settled,  giving  to 
a  payment  after  the  day  and  on  the  day  precisely  the  same  conse- 
quences. I  think,  therefore,  with  great  respect  for  a  jurist  so 
learned  and  accurate,  that  he  differed  from  the  Supreme  C'ouit, 
and  criticised  its  opinion,  without  due  reflection  upon  the  real 
ground  of  the  decision.^ 

Such  being,  as  I  think,  the  clear  result  of  the  authorities,  a  re- 
newed discussion  of  the  question  may  seem  to  be  unnecessary.  I 
cannot  help  saying,  however,  that  a  decision  by  this  court  in  oppo- 
sition to  the  rule  laid  down  in  the  cases  referred  to  would  introduce 
into  the  law  of  mortgage  an  inconsistency  too  plain  to  escape  ob- 
servation. In  the  early  history  of  that  law  the  courts  of  equity, 
departing  from  the  letter  of  the  contract,  but  adhering  to  the 
intention  of  the  parties,  adopted  the  just  and  liberal  doctrine  that 
a  mortgage  was  but  a  pledge  or  security,  always  redeemable  until 
foreclosure.  The  courts  of  law  followed  in  the  same  direction.  As 
Lord  Redesdale  observed  (Mitf.  428):  "The  distinction  between 
law  and  equity  is  never  in  any  country  a  permanent  distinction. 
Law  and  equity  are  in  continual  progression,  and  the  former  is 
constantly  gaining  upon  the  latter.  A  great  part  of  what  is  now 
strict  law  was  formerly  considered  as  equity,  and  the  equitable  de- 
cisions of  this  age  will  unavoidably  be  ranked  under  the  .strict  law 
of  the  next."  Such,  preeminently,  has  been  the  course  of  juris- 
prudence on  this  subject.  The  doctrines  originating  in  the  courts 
of  equity  respecting  the  rights  of  mortgagor  and  mortgagee  have 
been  incorporated  into  the  code  of  the  common  law,  so- that  there 
is  now  no  difference  between  the  two  systems.  .  .  . 

In  this  State,  the  rules  of  law  and  equity  in  regard  to  mortgages 
have  never  differed  in  any  degree;  it  being  the  doctrine  of  both 
systems  that  a  mortgage  is  but  a  personal  interest  merely.  This 
proposition,  in  its  full  length  and  breadth,  was  determined  in 
Runyan  v.  Mersereau,  11  Johns.  534,  where  the  question  arose  in 
the  most  direct  manner  whether  the  freehold  was  in  the  mortgagor 
or  mortgagee.  The  plaintiff,  deriving  title  under  the  mortgagor, 
sued  in  trespass  for  cutting  timber,  the  defendant  jusrifying  under 
a  license  from  the  mortgagee.  It  was  held  that  the  action  was 
maintainable,  the  decision  being  placed  explicitly  on  the  ground 
that  the  former  was  the  real  owner  of  the  land,  while  the  latter  had 
a  chattel  interest  only.    So  it  has  been  held  in  repeated  decisions 

'Here     follows     an     examination      26  Wend.  541;  and  Arnot   v.   Post, 
of  the  cases  of  Edwards  v.  Fanners'       ()  Hill,  65,  which  is  omitted. 
Fire  Ins.  &  Loan  Co.,  21  Wend.  467, 


594  DISCHARGE    OF   MORTGAGE 

that  the  mortgagee  cannot,  in  any  way,  convey,  devise,  mortgage 
or  incumber  the  land,  while  the  mortgagor  can  do  all  these  things; 
that  judgments  against  a  mortgagee,  which  are  a  lien  on  all  legal 
estates,  do  not  affect  his  interest  in  the  lands  mortgaged;  that  such 
an  interest  does  not  descend  to  heirs,  but  goes  to  the  personal 
representative  as  a  chose  in  action;  that  it  is  not  subject  to  dower 
or  curtesy;  that  it  passes  by  a  parol  transfer,  and  by  any  transfer 
of  the  debt;  and,  finally,  that  it  is  extinguished  by  payment,  or 
by  whatever  extinguishes  the  debt.  (3  Johns.  Cas,.  329;  1  J.  R. 
590;  4  id.  42;  7  id.  278;  15  id.  319;  6  id.  290;  2  Paige,  68,  586; 
AVend.  603;  2  Barb.  Ch.  119.) 

But  it  has  been  said  that  the  mortgagee  could  maintain  eject- 
ment against  the  mortgagor  until  our  Revised  Statutes  abolished 
that  remedy  in  such  a  case,  and  that  even  since  those  statutes  the 
mortgagee,  being  in  possession,  may  retain  it  until  the  debt  is  paid. 
All  this  is  true;  but  it  presents  no  anomaly  or  inconsistency  in  the 
law.  The  mortgagee's  right  to  bring  ejectment,  or,  being  in  pos- 
session, to  defend  himself  against  an  ejectment  by  the  mortgagor, 
is  but  a  right  to  recover  or  to  retain  the  possession  of  the  pledge 
for  the  purpose  of  paying  the  debt.  (6  Conn.  163.)  Such  a  right 
is  but  the  incident  of  the  debt,  and  has  no  relation  to  a  title  or 
estate  in  the  lands.  Any  contract  for  the  possession  of  lands, 
however  transient  or  limited,  will  carry  the  right  to  recover  that 
possession;  and  such  was  deemed  to  be  the  nature  and  construc- 
tion of  a  mortgage,  it  being  considered  that  the  parties  intended 
the  possession  of  the  thing  hypothecated  should  go  with  the  con- 
tract. Ejectment  was  not,  in  fact,  a  real  action  at  the  common 
law.  That  remedy,  in  its  origin,  was  only  to  recover  possession 
according  to  some  temporary  right;  and  it  was  only  by  the  use  of 
fictions  that  the  title  was  at  length  allowed  to  be  brought  into 
controversy.  (3  Bl.  199,  200.)  When  the  Legislature,  by  express 
enactment,  denied  this  remedy  to  mortgagees,  they  undoubtedly 
supposed  they  had  swept  away  the  only  remaining  vestige  of  the 
ancient  rule  of  the  common  law  which  regarded  a  mortgage  as  a 
conveyance  of  the  freehold;  yet  I  see  nothing  inconsistent  or 
anomalous  in  allowing  the  possession,  once  acquired  for  the  pur- 
pose of  satisfying  the  mortgage  debt,  to  be  retained  until  that 
purpose  is  accomplished.  When  that  purpose  is  attained,  the  pos- 
sessory right  instantly  ceases,  and  the  title  is,  as  before,  in  the 
mortgagor,  without  a  reconveyance.  The  notion  that  a  mort- 
gagee's possession,  whether  before  or  after  default,  enlarges  his 
estate,  or  in  any  respect  changes  the  simple  relation  of  debtor 


KORTRIGHT   V.    CADY  595 

and  creditor  between  him  and  his  mortgagee,  rests  upon  no  foun- 
dation. We  may  call  it  a  just  and  lawful  possession,  like  the  pos- 
session of  any  other  pledge;  but  when  its  object  is  accomplished 
it  is  neither  just  nor  lawful  for  an  instant  longer. 

There  are  terms  of  the  ancient  law  which  have  come  down  to  us, 
having  long  survived  the  principles  of  which  they  were  the  appro- 
priate expression.  Thus  the  words  "law  day"  once,  and  very  ex- 
pressively, marked  the  time  when  all  legal  rights  were  lost  and 
gone,  by  the  mortgagor's  default.  There  is  now  no  such  time 
until  foreclosure  by  a  judicial  sentence  or  sale  under  a  power.  But 
the  term  is  still  in  use,  serving  no  other  purpose  than  to  engender 
confusion  and  uncertainty  in  minds  which  derive  their  conceptions 
from  words  rather  than  things.  So  we  have  the  terms  "redemp- 
tion" and  "equity  of  redemption,"  which  belonged  to  a  system  of 
law  that  gave  the  legal  estate,  defeasibly  before  default  and  ab- 
solutely afterwards,  to  the  mortgagee,  and  which,  while  that  sys- 
tem prevailed,  were  descriptive  of  the  mortgagor's  right  to  go  into 
equity,  on  the  condition  of  paying  his  debt,  to  redeem  a  forfeited 
estate  and  demand  a  reconveyance.  These  descriptive  words  yet 
survive  and  are  in  use,  although  the  ideas  they  once  represented 
have  long  since  become  obsolete.  Even  the  word  "forfeiture," 
still  so  often  used,  is  no  longer,  in  reference  to  this  subject,  the  ex- 
pression of  any  principle,  as  it  once  was.  There  is  now  no  for- 
feiture of  a  mortgaged  estate.  The  mortgagor's  rights  may  be 
foreclosed  by  a  sentence  in  the  courts,  or  by  a  sale  had  in  the 
manner  prescribed  by  the  statute  law,  if  he  has  himself,  in  the 
contract,  given  authority  thus  to  sell;  but,  until  foreclosure,  his 
estate  the  day  after  a  default  is  exactly  what  it  was  the  day  before. 
Controversies  like  the  present  would  cease  to  arise  if  the  mere 
terms  of  the  law  were  no  longer  confounded  with  its  principles. 

The  proposition  that  a  tender  of  the  money  due  on  a  mortgage,, 
made  at  any  time  before  a  foreclosure,  discharges  the  lien,  is  the 
logical  result  of  premises  which  are  admitted  to  be  true.  These 
are,  that  the  mortgagor  has  the  same  right  after  as  before  a  default 
to  pay  his  debt,  and  so  clear  his  estate  from  the  incumbrance;  and 
that  payment  being  actually  made,  the  lien  thereby  becomes  ex- 
tinct. We  have,  then,  only  to  apply  an  admitted  principle  in  the 
law  of  tender,  which  is,  that  tender  is  equivalent  to  payment  as  to 
all  things  which  are  incidental  and  accessorial  to  the  debt.  The 
creditor,  by  refusing  to  accept,  does  not  forfeit  his  right  to  the  very 
thing  tendered,  but  he  does  lose  all  collateral  benefits  or  securities. 
(3  Johns.  Cas.  243;  12  J.  R.  274;  6  Wend.  22;  6  Cow.  728;  Coggs  v. 


596  DISCHARGE    OF   MORTGAGE 

Bernard,  2  Lord  Ray.  R.  916.)  Thus,  after  the  tender  of  a  money- 
debt,  followed  by  payment  into  court,  interest  and  costs  cannot 
be  recovered.  The  instantaneous  effect  is  to  discharge  any  col- 
lateral lien,  as  a  pledge  of  goods  or  the  right  of  distress.  It  is  not 
denied  that  the  same  principle  applies  to  a  mortgage,  if  the  tender 
be  made  at  the  very  time  when  the  money  is  due.  If  the  creditor 
refuses,  he  justly  loses  his  security.  It  is  impossible  to  hold  other- 
wise, although  the  tender  be  made  afterwards,  unless  we  also  say 
that  the  mortgage,  which  was  before  a  mere  security,  becomes  a 
freehold  estate  by  reason  of  the  default.  That  this  is  not  true  has 
been  sufficiently  shown. 

It  is  said  that  mortgagees  will  be  put  to  great  inconvenience 
if  at  any  period,  however  distant  from  the  time  of  maturity,  they 
must  know  the  amount  of  the  debt  and  accept  a  tender  on  peril  of 
losing  their  security.  The  force  of  this  argument  is  not  perceived. 
As  a  tender  must  be  unqualified  by  any  conditions,  there  can  never 
be  any  good  reason  for  not  accepting  the  sum  offered,  whether  it 
be  offered  when  it  is  due  or  afterwards.  By  accepting  the  tender, 
the  creditor  loses  nothing  and  incurs  no  hazard.  If  the  sum  be 
insufficient,  the  security  remains.  It  is  only  by  refusing,  that  any 
inconvenience  can  possibly  arise.  But,  whatever  may  be  the  con- 
sequences of  refusal,  the  creditor  may  justly  charge  them  to  his 
own  folly. 

The  judgment  of  the  Supreme  Court  must  be  reversed,  and  a 
new  trial  granted. 

Da  VIES,  J.  [after  a  careful  examination  of  the  earfier  authorities, 
proceeded  as  follows] :  The  rule  in  England  was  therefore  ancient 
and  well  settled,  that  payment  on  the  law  day  extinguished  the  in- 
terest of  the  mortgagee  in  the  lands  mortgaged;  and  tender  and 
refusal  at  the  same  time  produced  the  same  result.  But  payment 
after,  and  acceptance,  did  not  revest  the  estate  in  the  mortgagor 
without  a  reconveyance  from  the  mortgagee;  and  a  tender  and 
refusal  would,  of  course,  not  produce  that  result.  The  mortgagor's 
only  remedy  was  to  avail  himself  of  the  benefit  of  the  rule  in  equity, 
and  file  his  bill  to  redeem.  The  only  question  presented  for  our 
consideration  in  this  case  is,  whether  a  tender  of  the  sum  due  on  a 
mortgage,  after  the  day  appointed  by  it  for  its  payment,  extin- 
guishes the  lien  of  the  mortgage  on  the  land  covered  by  it.  We 
have  seen  that  by  the  common  law  such  tender  and  refusal  upon 
the  law  day  extinguishes  the  lien  of  the  mortgage,  though  the  debt 
remains.    In  this  State  the  law  is  well  settled  that  a  mortgage  is 


KORTRIGHT   V.    CADY  597 

a  mere  security  or  pledge  of  the  land  covered  by  it  for  the  money 
borrowed  or  owing,  and  referred  to  in  it,  and  that  the  mortgagor 
remains  the  owner  of  the  estate  mortgaged,  and  may  maintain  tres- 
pass as  against  even  the  mortgagee.  {Runyan  v.  Mersereau,  11 
John.  534.)  The  debt,  in  the  eye  of  the  law,  thus  becomes  the  prin- 
cipal, and  the  landed  security  merely  appurtenant  and  secondary; 
and  the  rights  of  the  parties  must  be  governed  by  those  principles 
of  law  applicable  to  analogous  cases.  Acceptance  of  paj  ment  of 
the  amount  due  on  a  mortgage,  at  any  time  before  foreclosure,  has 
always  been  held  to  discharge  the  incumbrance  on  the  land;  as 
acceptance  of  the  amount  for  which  personal  property  was  held  dis- 
charged it  from  the  pledge.  Tender  and  refusal  are  equivalent 
to  performance.  (Kemble  v.  Wallis,  10  Wend.  374.)  This  is  to 
be  taken  with  the  reservation  already  stated,  that  the  debt  cr  duty 
remained,  and  that  the  rejected  tender,  at  or  after  the  stipulated 
time  of  payment  or  performance,  has  the  effect  only  to  discharge 
the  party  thus  making  it  from  all  the  contingent,  consequential  or 
accessory  responsibilities  and  incidents  of  his  contract,  but  without 
releasing  his  prior  debt.  (Coit  v.  Houston,  3  John.  Ca.  243.)  In 
Hunter  v.  Le  Conte,  6  Cow.  728,  the  Supreme  Court  held  that  a 
tender  of  rent  takes  away  the  right  to  distrain  till  a  subsequent  de- 
mand and  refusal ;  but  it  does  not  take  away  the  right  to  sue  for  the 
rent  as  for  a  debt.  It  only  saves  the  interest  and  costs.  And  that 
a  tender  of  rent  makes  a  distress  wrongful,  though  the  tender  be 
not  made  tiU  after  the  rent  day.  It  will  readily  be  perceived  that 
the  principle  of  this  case  bears  directly  upon  the  question  now 
under  consideration;  and  it  is  not  perceived,  if  it  be  sound,  why  a 
tender  and  refusal  of  the  amount  due  on  a  mortgage  does  not  extin- 
guish its  lien  equally  with  a  tender  of  rent  and  refusal,  which,  as 
we  have  seen,  extinguishes  the  right  of  distress.  But  a  still  closer 
analogy  to  the  present  question  is  presented  by  the  law  of  tender,  as 
to  the  lien  on  goods  pledged.  Lord  Ch.  J.  Holt,  in  his  opinion  in  the 
celebrated  case  of  Coggs  v.  Bernard,  2  Lord  Ray.  909,  speaking 
of  the  fourth  class  of  bailments,  says:  "If  the  money  for  which  the 
goods  are  pawned  be  tendered  to  the  pawnee  before  they  are  lost, 
then  the  pawnee  shall  be  answerable  for  them,  because  the  pawnee, 
by  detaining  them  after  the  tender  of  the  money,  is  a  wrongdoer, 
and  it  is  a  wrongful  detainer  of  the  goods,  and  the  special  property 
of  the  pawnee  is  determined."  So  also  Comyn:  "By  tender  of 
the  money,  the  property  in  the  goods  is  determined,  and  the  pledge 
ought  to  be  returned.  But  if  the  pawnee  refuse  to  restore  the' 
iDledge  upon  tender,  trover  lies  against  him."    (Comyn's  Dig.,  tit. 


598  DISCHARGE    OF    MORTGAGE 

Mortg.,  A,  and  cases  there  cited.)  Holding,  as  we  do,  therefore,  in 
this  State  that  the  land  mortgaged  is  but  a  security  for  the  debt  due 
to  the  mortgagee,  in  other  words,  a  pledge  to  him  to  secure  its  pay- 
ment, it  is  difficult  to  see  why  the  principles  enunciated  and  well 
settled  in  reference  to  the  pledge  of  personal  property  do  not  apply, 
and  why  a  tender  and  refusal  at  any  time  of  the  full  amount  of  the 
debt  due  does  not  extinguish  the  lien  of  the  mortgagee,  or  pledgee, 
in  the  one  case  as  it  clearly  does  in  the  other. 

But  I  think  we  are  not  left  at  liberty  to  settle  this  case  on  princi- 
ple, but  are  to  regard  it  as  authoritatively  disposed  of  by  the  courts 
of  this  State.  A  very  careful  examination  of  the  decisions  has 
brought  my  mind  to  the  conviction,  contrary  to  my  first  impres- 
sion, that  we  should  regard  the  question  now  presented  as  not  open 
to  further  discussion.  I  shall  recur  to  the  cases  in  which  this  ques- 
tion has  arisen;  and  I  think  an  examination  of  them  will  lead  to  the 
same  conclusions  to  which  I  have  arrived.^  .  .  . 

It  is  not  perceived  how  the  mortgagee  is  to  be  embarrassed,  or  his 
security  impaired,  by  the  adoption  of  this  rule,  as  seems  to  be  sup- 
posed by  the  Chancellor  in  Edwards  v.  Farmers'  Loan  Company, 
26  Wend.  552.  If  the  mortgagor  does  not  tender  the  full  amount 
due,  the  lien  of  the  mortgage  is  not  extinguished.  The  mortgagee 
runs  no  risk  in  accepting  the  tender.  If  it  is  the  full  amount  due, 
his  mortgage  lien  is  extinguished  and  his  debt  is  paid.  This  is 
all  he  has  a  right  to  demand  or  expect,  and  all  he  can  in  any  con- 
tingency obtain.  His  acceptance  of  the  money  tendered,  if  in- 
adequate and  less  than  the  amount  actually  due,  only  extinguishes 
the  lien  pro  tarUo,  and  the  mortgage  remains  intact  for  the  residue. 
A  much  greater  hardship  might  be  imposed,  and  serious  injury  be 
produced,  by  holding  that  the  mortgagor  cannot  extinguish  the  hen 
of  the  mortgage  by  a  tender  of  the  full  amount  due.  It  has  never 
occurred  to  any  judge  to  argue  that  a  pawnee  was  in  great  peril, 
and  in  danger  of  losing  the  benefit  of  his  pawn,  by  the  enforcement 
of  the  well  settled  rule  that  a  tender  of  the  amount  of  the  loan  and 
interest,  and  refusal,  extinguished  the  lien  on  the  pawn.  Littleton 
well  says,  that  it  shall  be  accounted  a  man's  own  folly  that  he  re- 
fused the  money  when  a  lawful  tender  of  it  was  made  to  him.  The 
only  effect  upon  the  rights  of  the  mortgagee  is,  that  the  land  or 
thing  pledged  is  released  from  the  lien,  but  the  debt  remaineth. 

The  only  remaining  question  to  be  considered  is,  whether  the  ten- 
der in  this  case  was  well  made,  it  not  being  followed  with  the 

'  The  examination  of  the  authorities  is  omitted. 


KORTRIGHT    V.    CADY  599 

allegation  of  tout  temps  prist,  and  the  money  not  having  been 
brought  into  court.  It  will  be  seen,  by  reference  to  the  authorities, 
that  these  are  not  required  when  the  tender  has  only  the  effect  of 
extinguishing  the  lien,  and  does  not  operate  to  discharge  the  debt 
or  sum  owing.  In  the  latter  case  the  averment  of  tout  temps  prist 
"followed  up  by  bringing  the  money  into  court,  is  essential  to  a  good 
plea  of  tender.  (Hume  v.  Peploe,  8  East,  168;  Giles  v.  Hartis,  1 
Lord  Ray.  254.)  But  if  a  man  make  a  bond  for  the  payment  of  a 
loan  of  money,  and  afterwards  make  a  defeasance  for  the  payment 
of  a  lesser  sum  at  a  day,  if  the  obligor  tender  the  lesser  sum  at  the 
day,  and  the  obligee  refuse  it,  he  shall  never  have  any  remedy  by 
law  to  recover  it,  because  it  is  no  parcel  of  the  sum  contained  in  the 
obligation.  And  in  this  case,  in  pleading  of  the  tender  and  refusal, 
the  party  shall  not  be  driven  to  plead  that  he  is  yet  ready  to  pay 
the  same,  or  to  render  it  in  court.  (Co.  Lit.,  note  to  §  335.)  The 
same  principle  was  held  by  the  Supreme  Court  of  this  State  in 
Hunter  v.  Le  Conte,  6  Cow.  728,  and  cases  there  cited. 

The  judgment  appealed  from  should  be  reversed  and  a  new  trial 
ordered,  with  costs  to  abide  the  event. 

Selden,  Clerke,  Wright,  Bacon,  and  Denio,  Js.,  concurred; 
the  latter  putting  his  concurrence  on  the  ground  that  the  question 
was  so  far  determined  by  authority  in  this  State,  that  it  would 
now  be  indiscreet  to  reexamine  it  in  the  light  of  reason  and  the 
analogies  of  the  law. 

Welles,  J.  (Dissenting.)  The  only  question  involved  in  the 
case  is,  whether  the  tender  made  by  the  defendant  Cady,  under  the 
circumstances,  was  effectual  to  extricate  the  premises  in  question 
from  the  lien  created  by  the  mortgage  of  Blunt  to  Miller.  This 
tender  was  made  after  the  day  provided  in  the  bond  and  mortgage 
for  the  payment  of  the  money,  which  is  called  the  law  day.  If  the 
sum  tendered  was  sufficient  in  amount,  and  was  made  to  the  proper 
person,  the  question  is  reduced  to  the  single  point  whether 
the  lien  of  a  mortgage  is,  ipso  facto,  discharged  by  a  tender  of  the 
amount  due  made  after  the  law  day;  because,  if  it  is,  there  is  no 
necessity,  in  an  answer  setting  it  up,  of  the  allegation  of  tout  temps 
prist,  or  of  any  evidence  to  show  that  the  tender  has  been  kept 
good,  neither  of  which  is  contained  in  the  present  case;  but  the 
defendant  relies  solely  upon  the  fact  of  a  tender  and  refusal  as 
equivalent  to  payment,  for  the  purpose  of  extinguishing  the  lien 
of  the  mortgage. 


600  DISCHARGE    OF   MORTGAGE 

If  a  tender  has  the  effect  in  any  case  to  release  the  lien,  it  pro- 
duces that  effect  the  moment  it  is  made,  whether  accepted  or  re- 
fused. If  accepted,  it  is  a  payment;  if  refused,  it  is  the  folly  of  the 
holder  of  the  mortgage,  and  the  lien  is  gone  and  cannot  be  restored 
by  his  subsequent  change  of  mind  and  offer  to  receive  the  money 
tendered.  This  must  be  so;  otherwise,  the  tender  would  not  dis- 
charge the  lien.  It  is  quite  different  from  the  case  of  an  ordinarj^ 
plea  of  tender  at  common  law,  for  the  purpose  of  stopping  interest 
and  preventing  costs,  in  an  action  for  money  due  on  contract,  in 
which  the  plea  must  contain  the  averment  of  tout  temps  prist,  and 
where  a  replication  of  a  subsequent  demand,  before  suit,  of  the 
money  tendered,  and  refusal  by  the  defendant,  would  be  a  good 
answer  to  the  plea. 

In  the  case  of  a  mortgage  which  is  collateral  to  the  debt,  it  is 
agreed  that  a  tender  may  be  made  by  the  person  owning  the  equity 
of  redemption,  which  will  extinguish  the  lien  of  the  mortgage  for- 
ever, without  affecting  the  debt.  The  primary  object  of  a  fore- 
closure suit  is  to  enforce  the  lien,  and  if  that  is  met  by  a  sufficient 
tender,  the  cause  of  action  is  gone  and  cannot  be  restored  by  a  sub- 
sequent demand  and  refusal.  It  is  important,  therefore,  to  con- 
sider whether  the  tender  in  the  present  case,  being  made  after  the 
law  day,  if  good  in  other  respects,  had  the  effect  to  discharge  the 
lien  of  the  mortgage.^  .  .  . 

My  own  opinion  is,  after  a  careful  examination  of  the  cases,  that 
the  weight  of  authority  is  in  favor  of  the  rule  as  it  existed  at  the 
common  law.  If  that  rule  has  not  been  abrogated  or  modified,  all 
will  admit  that  it  is  the  plain  duty  of  the  courts  to  follow  and  en- 
force it.  Clearly  there  is  no  stare  decisis  in  our  way.  It  is  of  im- 
portance that  the  rule  be  definitely  settled,  and  its  boundaries  de- 
fined. Before  we  hold  a  rule  different  from  what  we  find  it  settled 
l)y  the  common  law,  we  should  require  evidence  that  the  rule  has 
been  changed  by  competent  authority,  either  expressly  or  by  nec- 
essary implication. 

This  evidence,  the  advocates  of  the  change  of  the  rule  claim,  is 
found  in  the  changed  character  of  a  mortgage  upon  land,  in  conse- 
quence of  various  legislative  enactments.  We  are  told  that  when 
the  rule  of  the  common  law  in  question  was  adopted,  a  mortgage 
conveyed  a  conditional  estate  in  the  premises,  which  entitled  the 
mortgagee  to  possession,  and  upon  which  he  could  maintain  eject- 
ment; and  that  a  mortgage  does  not  now  pass  any  estate  in  the  land, 

^  The  learned  judge  then  re-ex-  This  portion  of  the  opinion  is 
amines   the   New    York    authorities.      omitted. 


KORTRIGHT   V.    CADY  601 

but  is  merely  the  creation  of  a  specific  lien  as  security  for  the  pay- 
ment of  a  debt  or  the  performance  of  a  duty;  and  that  the  statute 
has  taken  away  the  right  of  the  mortgagee  to  maintain  ejectment. 
All  this  is  true;  and  doubtless  other  shades  of  difference  may  be 
found  between  the  legal  effect  of  a  mortgage  at  common  law  and 
as  it  now  exists.  But  they  will  be  found  to  relate  to  the  remedy, 
or  to  consist  in  collateral  or  incidental  circumstances.  Mortgages 
are  substantially  what  they  always  were.  The  fact  that  they  are 
not  now  regarded  as  transferring  the  freehold,  but  are  merely  spe- 
cific liens,  is  altogether  theoretical  and  ideal,  so  far  as  respects  the 
question  under  consideration.  The  great  object  of  these  instru- 
ments is  the  same  now  as  it  always  was — that  of  security  for  the 
payment  of  money  or  the  performance  of  a  duty.  A  mortgagee 
in  possession  is  now,  as  always  heretofore,  accountable  for  rents 
and  profits,  and  he  may  still  defend  his  possession  with  the  mort- 
gage the  same  as  ever.  I  know  of  no  difference  between  the  right 
of  the  mortgagor,  or  the  person  owning  the  equity  of  redemption, 
to  redeem  the  premises  from  the  lien  of  the  mortgage,  as  that  right 
now  exists,  and  as  it  existed  in  the  time  of  Coke  or  Littleton. 
That  right  is  governed  now  by  substantially  the  same  rules  as 
then. 

The  rule  contended  for  by  the  plaintiff  is  reasonable,  convenient 
and  just.  In  the  first  place,  the  parties  to  the  mortgage  have,  by 
agreement,  fixed  upon  the  time  of  payment,  and  if  the  mortgagor 
fulfills  his  agreement  by  paying  on  the  day  appointed,  or  tendering 
payment  on  that  day,  the  lien  is  discharged.  The  parties  are  then 
to  be  ready,  the  mortgagor  to  pay,  and  the  mortgagee  to  receive. 
If  the  former  performs  his  duty,  or  tenders  performance,  and  the 
latter  refuses,  his  lien  is  gone  forever;  he  has  no  excuse  for  his  folly, 
and  is  entitled  to  no  consideration  for  the  loss  of  his  lien.  On  the 
law  day  each  party  is  presumed  to  know  exactly  what  his  duty  is, 
and  the  amount  the  mortgagor  is  bound  to  pay  and  the  mortgagee 
entitled  to  receive. 

If  the  mortgagor  allows  the  law  day  to  pass  without  payment  or 
tender,  he  then  is  a  defaulter.  If  he  can  discharge  the  lien  by  a 
tender  of  payment  the  next  day,  there  is  no  reason  why  he  may 
not  do  the  same  by  a  tender  after  the  lapse  of  one  year  or  of  ten 
years. 

Suppose  the  mortgagee  goes  into  possession  under  the  mortgage, 
by  consent  of  the  mortgagor,  immecliately  upon  default  of  pay- 
ment, and  the  latter  takes  no  steps  towards  payment  for  years 
after;  what  amount  shall  he  tender  when  he  gets  ready  for  pay- 


602  DISCHARGE    OF    MORTGAGE 

ment?  what  abatement  from  the  principal  and  interest  shall 
be  made  for  mesne  profits?  Shall  the  defaulting  mortgagor 
be  permitted  to  select  his  own  time,  and  then  make  a  tender 
of  such  an  amount  as  he  shall  deem  proper,  and  the  mort- 
gagee be  bound  to  accept  it  in  full,  at  the  peril  of  losing  his  lien 
forever? 

Suppose  again  the  case  of  a  defaulting  mortgagor,  who  claims  to 
have  made. partial  payments,  or  to  be  entitled  to  a  set-off,  about 
which  he  and  the  mortgagee  in  good  faith  differ:  according  to  the 
rule  claimed  by  the  defendant,  he  must  accept  in  full  the  amount 
tendered  at  the  peril  of  losing  his  lien,  provided,  upon  a  litigation, 
it  shall  be  adjudged  that  the  tender  was  sufficient  in  amount.  It 
seems  to  me  that  the  old  rule  is  the  only  just  and  wholesome  one 
that  can  be  recognized.  It  is  quite  as  favorable  to  the  mortgagor 
as  he  can  in  reason  ask.  If  he  makes  a  sufficient  tender  after  the 
day  and  before  an  action  is  brought  to  foreclose  the  mortgage,  let 
him  keep  the  tender  good,  and,  when  he  is  sued,  let  him  set  it  up 
as  a  defence,  bring  the  money  into  court  and  offer  payment  as  in 
other  cases,  and  the  court  will  in  such  a  case  decree  the  mortgage 
satisfied  and  discharged,  and  adjudge  costs  against  the  plaintiff. 
Or  if  for  any  reason  the  mortgagor,  or  the  person  whose  duty  or 
interest  it  may  be  to  have  the  lien  discharged,  does  not  wish  to 
wait  the  mortgagee's  time  for  foreclosing,  let  him  make  his  tender 
and  keep  it  good,  and  then  bring  his  action  to  redeem,  alleging 
the  tender  and  offering  to  pay;  and  if,  upon  the  trial,  it  is  found 
that  his  tender  was  sufficient  and  the  plaintiff  was  ready  to  pay, 
the  court  would  give  him  all  the  relief  which  equity  and  justice  re- 
quired. In  all  these  cases  the  mortgagee  would  have  the  right  to 
have  the  disputed  questions  adjudicated  without  losing  his  hen 
for  the  amount  in  equity  and  justice  due  to  him. 

The  rule  contended  for  by  the  defendant  would,  in  many  cases, 
operate  as  a  bounty  to  negligent  and  defaulting  debtors,  and 
mortgagees  would,  under  its  workings,  be  induced  to  purchase 
their  peace  at  an  unjust  sacrifice. 

For  the  foregoing  reasons,  I  am  of  the  opinion  that  the  rule  of 
Littleton,  as  expounded  by  Coke,  and  as,  all  now  admit,  was  the 
rule  of  the  common  law  in  relation  to  the  effect  of  a  tender  after 
the  law  day,  is  still  the  law  of  this  State;  and  as  the  tender  in  this 
case  has  not  been  kept  good,  and  the  defendant's  answer  contains 
no  offer  of  payment,  and  the  facts  found  by  the  court  before  whom 
the  cause  was  tried  do  not  show  that  the  tender  has  in  any  sense 
been  kept  good,  or  that  the  defendant  was  ready  to  pay,  &c.,  I 


SHIELDS    V.    LOZEAR 


603 


think  that  he  can  have  no  benefit  by  reason  of  it;  and  that  the 
judgment  should  be  affirmed,  with  costs. 

.     Judgment  reversed.^ 


SHIELDS  V.  LOZEAR 
Court  of  Errors  and  Appeals  of  New  Jersey,  1869 
(34  N.  J.  L.  496) 
In  ejectment.    Error  to  the  Supreme  Court. 

Depue,  J.  The  bills  of  exception  sealed  at  the  trial  raise  two 
questions : 

Second,  whether  a  tender  by  the  mortgagor  of  the  money  secured 
by  a  mortgage,  which  is  not  accepted  by  the  mortgagee,  made 
after  the  day  of  paj^ment  named  in  the  condition,  terminates  the 
estate  of  the  mortgagee  in  the  mortgaged  premises,  and  extin- 
guishes the  lien  of  the  mortgage  on  the  land.-  .  .  . 

The  extinguishment  of  the  lien  of  the  mortgage  by  the  unac- 
cepted tender  of  the  mortgage  money  after  the  day  named  in  the 


'  Caruthers  v.  Humphrey,  12  Mich. 
270  aSM);  Polls  v.  Plaisled,  30  Mich, 
149  (1874);  Slory  v.  Krewson,  55 
Ind.  397  (1876);  Thomas  v.  Seatlle 
Breioing  Co.,  48  Wash.  560,  94  Pac. 
116  (1908)  accord.  So  where  mort- 
gagee evades  tender:  Ferguson  v. 
Popjp,  42  Mich.  115  (1879);  McCMan 
V.  Coffin,  93  Ind.  456  (1883).  And 
see  Breitenbach  v.  Turner,  18  Wis. 
140  (1864),  and  Mankel  v.  Bel- 
scamper  84  Wis.  218  (1893),  semble, 
accord.  But  the  authorities  generally 
are  contra:  Currier  v.  Gale,  9  Allen 
(Mass.)  522  (1865);  Perre  v.  Caslro,  14 
Cal.  519  (1860);  Crain  v.  McGoon,  86 
111.  431  (1877);  Matlhews  v.  Lindsay, 
20  Fla.  962  {IS^A);  Knollenhurg  v. 
Nixon,  171  Mo.  445,  72  S.  W.  41 
(1903). 

In  Perre  v.  Castro,  supra,  the  Court 
said,  "The  debtor  is  as  much  in 
default  for  not  paying  when  the 
debt  is  due  as  the  creditor  is  in  de- 
fault  for    not    receiving   the   money 


afterwards  when  offered.  It  would 
be  very  harsh  to  hold  that  the  debt 
is  lost — -the  general  effect  of  losing 
the  security — by  a  mere  refusal  at  a 
particular  moment  to  receive  it." 

In  the  recent  Washington  case 
of  Easion  v.  Littooy,  158  Pac.  531 
(1916),  held,  that  "in  order  to  dis- 
charge the  Hen,  the  proof  must  be 
clear  that  the  refusal  was  palpably 
unreasonable,  absolute,  arbitrary  and 
unaccompanied  by  any  bona  fide, 
though  mistaken,  claim  of  right." 
CJ.  Williams  v.  Ashe  (1896),  111 
Cal.  180,  43  Pac.  595. 

In  Maxwell  v.  Moore,  95  Ala. 
166,  10  So.  444  (1892),  a  lien  juris- 
diction held  that  a  tender  of  payment 
of  the  mortgaged  debt  after  matur- 
ity will  not  operate  to  discharge  the 
mortgage  lien  unless  the  money 
tendered  is  placed  in  the  custody  of 
the  Court. 

-  The  opinion  on  the  first  point  '/= 
omitted. 


604  DISCHARGE    OF   MORTGAGE 

condition,  was  contended  for  ])y  the  plaintiff's  counsel  with  much 
earnestness. 

A  mortgage,  at  common  law,  is  a  conveyance  absolute  in  its 
form,  granting  an  estate  defeasible  by  the  performance  of  a  con- 
dition subsequent.  The  estate  thus  created  was  strictly  an  estate 
on  condition,  and  in  a  court  of  law  was  treated  as  subject  to  be 
defeated  only  by  the  performance  of  the  condition  in  the  manner 
and  at  the  time  stipulated  for  in  the  defeasance.  If  made  on  con- 
dition that  the  conveyance  should  be  void  on  payment  of  a  def- 
inite sum  of  money  on  a  given  day,  and  the  condition  was  per- 
formed according  to  its  terms,  the  estate  reverted  back  to  the 
mortgagor  without  any  re-conveyance,  by  the  simple  operation 
of  the  condition.  A  tender  at  the  time  and  place  and  in  the  manner 
prescribed  in  the  instrument  itself  was  equivalent  to  performance, 
and  operated  to  determine  the  estate  of  the  mortgagee,  and  revest 
it  in  the  mortgagor.  (Lit.  §  335;  Co.  Lit.  207,  a.;  4  Kent,  193; 
Coote  on  Mortgages,  6;  Merritt  v.  Lambert,  7  Paige,  344.)  But 
when  the  condition  was  discharged  by  failure  to  comply  with  its 
terms,  the  estate  of  the  mortgagee  became  absolute  in  law,  and  the 
title  of  the  mortgagor  was  completely  divested  and  gone,  and  a 
reconveyance  was  necessary  to  restore  him  to  his  original  estate. 
(Lit.  §332;  2  Black.  Com.  158;  Coote  on  Mortgages,  9.)  So 
inflexibly  was  this  harsh  rule  of  the  law  adhered  to,  that  it  was 
lemarked  by  a  learned  writer  that  if  the  debtor  had  no  greater 
mercy  shown  to  him  than  a  court  of  law  will  allow,  the  smallest 
want  of  punctuality  in  his  payment  would  cause  him  forever  to 
lose  the  estate  he  had  pledged.  (Williams  on  Real  Prop.  333.) 
The  rigor  of  this  rule  was  somewhat  abated  by  the  statute  of 
7  George  IL,  ch.  20  (1  Evans'  Statutes,  243,  re-enacted  in  this 
State  December  3d,  1794,  Nix.  Dig.,  4th  ed.,  608),  which  per- 
mitted a  mortgagor,  when  an  action  was  brought  on  the  bond  or 
ejectment  on  the  mortgage,  pending  the  suit,  to  pay  to  the  mort- 
gagee the  mortgage  money,  interest,  and  all  costs  expended  in  any 
suit  at  law  or  in  equity;  or  in  case  of  a  refusal  to  accept  the  same, 
to  bring  such  money  into  court  where  such  action  was  pending, 
which  moneys  so  paid  or  brought  into  court  were  declared  to  be  a 
satisfaction  and  discharge  of  such  mortgage;  and  the  court  was 
required,  by  rule  of  court,  to  compel  the  mortgagee  to  assign,  sur- 
render, or  re-convey  the  mortgaged  premises  unto  the  mortgagor, 
or  to  such  other  person  as  he  should  for  that  purpose  nominate 
and  appoint.  In  cases  strictly  within  the  terms  of  this  statute, 
the  English  courts  of  law  have  exercised  an  equitable  jurisdiction 


SHIELDS   V.    LOZEAR  605 

to  enforce  a  redemption  on  payment  of  the  mortgage  debt  after 
default  in  payment,  according  to  the  condition,  by  compelling  a 
re-conveyance.  Except  in  cases  within  this  statute,  the  doctrine  of 
the  English  courts  is  in  accordance  with  the  ancient  common  law, 
that  at  law  a  failure  to  pay  at  the  day  prescribed  forfeits  the  estate 
of  the  mortgagor  under  the  condition,  leaving  him  only  an  equity 
of  redemption,  which  chancery  will  lay  hold  of  and  give  effect  to, 
by  compelling  a  re-conveyance  on  equitable  terms. 

In  the  United  States,  the  prevailing  doctrine  in  courts  of  law 
as  well  as  in  courts  of  equity,  is  to  consider  the  mortgage  as  merely 
ancillary  to  the  debt,  and  to  hold  that  the  estate  of  the  mortgage 
is  annihilated  by  the  extinguishment  of  the  debt  secured  by  it, 
after  the  day  of  payment  named  in  the  condition.  (2  Greenl. 
Cruise,  91,  note  1;  4  Kent,  193.)  In  fact,  the  latter  conclusion 
will  necessarily  follow  whenever  the  mortgage  is  regarded  not  as 
a  common-law  conveyance  on  condition,  but  as  a  security  for  the 
debt,  the  legal  estate  being  considered  as  subsisting  only  for  that 
purpose.  In  this  State  this  is  the  generally  received  aspect  in 
which  a  mortgage  is  regarded,  as  a  mere  security  for  the  debt. 
{Per  Chief  Justice  Green,  in  Osborne  v.  Tunis,  1  Dutcher,  651; 
per  Justice  Southard,  in  Montgomery  v.  Bruere,  1  South.  279, 
whose  dissenting  opinion  in  the  Supreme  Court  was  adopted  in  the 
Court  of  Errors  in  reversing  the  judgment  of  the  Supreme  Court. 

2  South.  865.)  Consequently,  payment  after  the  day  will  con- 
vert the  mortgagee  into  a  trustee  of  the  legal  estate  for  the  benefit 
of  the  mortgagor.  In  Harrison  v.  Eldridge,  2  Halst.  407,  Chief 
Justice  Kinsey,  speaking  of  payment  after  the  law-day,  says: 
"When  the  debt  is  discharged  according  to  law  the  mortgagee 
has  the  legal  seisin  in  trust  for  the  mortgagor,  and  the  court  will 
never  permit  the  trustee  or  those  claiming  under  him  to  set  up 
this  legal  estate  in  him  or  them,  to  defeat  the  possession  of  the 
cestui  que  trust.    This  principle  is  settled  in  Armstrong  v.  Pierce, 

3  Burr.  1898.  The  same  doctrine  being  applicable  to  all  trustees, 
the  court  would  not  permit  a  recovery  upon  a  merely  formal  title, 
when  the  cestui  que  trust  could  have  compelled  a  re-conveyance 
immediately,  and  thus  have  acquired  the  legal  title."  The  seventh 
section  of  the  act  of  June  7th,  1799  (Rev.  Laws,  463;  Nix.  Dig., 
4th  ed.,  611,  sec.  11)  which  authorizes  satisfaction  to  be  entered 
on  the  registry  of  the  mortgage,  in  discharge  of  the  mortgage, 
gives  a  legislative  sanction  to  this  effect  of  payment  in  the  case  of 
a  mortgage  which  has  been  recorded. 

But  a  tender,  though  it  is  equivalent  to  performance  where  the 


606  DISCHARGE    OF   MORTGAGE 

question  is  whether  the  party  is  in  default,  is  not  a  satisfaction  or 
extinguishment  of  a  debt.  Tender  of  the  mortgage  debt  on  the 
day  named  as  performance  of  the  condition,  and  by  force  of  the 
terms  of  the  condition,  determines  the  estate  of  the  mortgagee,  and 
the  condition  being  compHed  with,  the  land  reverts  to  the  mort- 
gagor by  the  simple  operation  of  the  condition.  The  courts  of  the 
State  of  New  York  have  given  the  same  effect  to  a  tender,  without 
payment,  after  the  day  prescribed  for  payment.  This  doctrine 
was  first  asserted  in  Jackson  v.  Crafts,  18  J.  R.  110,  on  a  misappre- 
hension of  a  passage  from  Littleton.  (Lit.  §§  335,  338.)  It  was 
denied  by  the  Chancellor  in  Merritt  v.  Lambert,  7  Paige,  344,  and 
re-affirmed  in  the  Supreme  Court  in  Edwards  v.  The  Farmers' 
Fire  Insurance  and  Loan  Company,  21  Wend.  467;  and  in  the 
Court  of  Errors,  in  the  same  case  on  error,  26  Wend.  541 :  and  by 
the  Supreme  Court  in  Arnot  v.  Post,  6  Hill,  65;  and  again  denied 
by  the  Court  of  Errors  in  reversing  the  last-mentioned  case.  {Post 
V.  Arnot,  2  Denio,  344.)  Finally,  in  Kortright  v.  Cady,  21  N.  Y. 
343,  the  question  was  set  at  rest  in  the  courts  of  that  State  by  re- 
affirming the  rule  laid  down  in  Jackson  v.  Crafts,  and  it  seems  now 
to  be  the  settled  law  in  that  State  that  a  tender  of  the  money  due 
upon  a  mortgage  at  any  time  before  foreclosure  discharges  the  lien 
without  payment,  though  made  after  the  law-day.  I  do  not  find 
that  the  rule,  as  finally  established  in  the  courts  of  New  York,  has 
been  adopted  by  the  courts  of  any  other  State.  In  Massachusetts, 
the  decisions  have  been  to  the  contrary.  {Maynard  v.  Hunt,  5' 
Pick.  240;  Currier  v.  Gale,  9  Allen,  522.)  In  an  early  case  in  New 
Hampshire  {Swett  v.  Horn,  1  New  Hamp.  332),  the  court  held, 
under  a  statute  declaring  that  all  real  estate  pledged  by  mortgage 
might  be  redeemed  by  paying  all  costs,  &c.,  provided  such  pa}'- 
ment  or  performance  or  tender  thereof  be  made  within  one  year 
after  the  entry  of  the  mortgagee  for  condition  broken,  that  tender 
more  than  a  year  after  breach  of  condition,  where  no  entry  had 
been  made  by  the  mortgagee,  discharged  the  lands.  In  a  subse- 
quent case  the  same  court  qualified  the  ruHng  of  this  case  by  deny- 
ing this  effect  of  the  tender  unless  the  money  was  brought  into 
court.  {Bailey  v.  Metcalf,  6  New  Hamp.  156.)  It  may  with  safety 
be  said  that  the  doctrine  of  the  New  York  courts,  originating  in 
error,  and  maintained  against  the  opinion  of  some  of  the  most 
eminent  jurists  that  have  occupied  the  bench  of  that  State,  is  with- 
out the  support  of  any  judicial  tribunal  in  this  country,  and  it  is 
Impossible  to  perceive  upon  what  principle  of  law  or  equity  it  can 
be  rested.    As  already  observed,  tender  on  the  day  named  deter- 


SHIELDS    r.    LOZEAR  607 

minates  the  estate  of  the  mortgagee,  because  it  is  performance  of 
the  condition.  Regarding  the  mortgage  as  remaining  after  de- 
fault only  as  a  security  for  the  debt,  payment  thereafter,  by  a  neces- 
sary sequence,  operates  as  extinguishment;  the  debt  being  the 
principal  and  the  security  the  accessory.  Whatever  discharges 
the  debt  extinguishes  the  security.  No  reason,  founded  in  prin- 
ciple, can  be  assigned  for  giving  that  effect  to  a  tender  after  for- 
feiture. The  appropriate  office  of  a  tender  is  to  relieve  the  debtor 
from  subsequently  accruing  interest,  and  the  costs  of  enforcing, 
by  a  suit,  the  obligation  which  by  the  tender  of  payment  he  was 
willing  to  perform.  The  debt  still  remains.  In  the  case  of  a  com- 
mon money-bond,  before  the  statute  4  Anne,  ch.  16,  §  12,  re- 
enacted  in  this  State  (Nix.  Dig.  631,  §  9),  payment  after  the  day 
would  not  be  pleaded  without  an  acquittance  by  deed.  (2  Saund. 
48,  c,  note  1;  Rosencrmitz  v.  Durling,  5  Dutcher,  191.)  The  statute 
only  applies  to  payments  actually  made,  and  a  tender  after  the 
day  cannot  be  pleaded.  (2  Saund.  48,  b,  note  i.)  And  if  the 
tender  is  made  on  the  day,  it  can  only  be  made  available  by  plea, 
accompanied  by  payment  into  court.    (Co.  Lit.  207,  a.) 

Where,  as  in  this  case,  the  mortgage  is  accompanied  by  a  bond, 
to  hold  that  a  tender,  after  default,  extinguished  the  mortgage, 
for  the  reason  that  after  such  default  it  remains  only  a  security 
for  the  debt,  will  lead  to  the  incongruity  of  giving  to  the  tender  an 
effect  with  respect  to  the  security,  which  by  the  rules  of  pleading 
and  established  principles  of  law  the  court  must  deny  in  an  action 
on  the  bond,  which  is  the  immediate  evidence  of  the  debt.  If  the 
form  of  the  instrument  which  evidences  the  debt  is  overlooked, 
and  the  question  is  viewed  in  the  aspect  in  which  the  indebtedness 
immediately  arose,  the  tender  does  not  pay  or  discharge  the  debt; 
and  though  it  will  avail  to  arrest  the  accruing  of  interest  and  to 
free  the  debtor  from  costs,  it  will  be  deprived  of  that  efficacy  by 
a  subsequent  demand  and  refusal.  If  legal  analogy  is  to  be  pur- 
sued, it  could  lead  no  further  than  to  deprive  the  mortgage  of 
operation  beyond  the  amount  due  when  the  tender  was  made, 
leaving  the  question  of  subsequently  accruing  interest  and  costs 
to  be  varied  by  the  subsequent  demand  and  refusal. 

The  instances  in  which  a  tender  and  refusal  amount  to  payment, 
and  will  operate  as  an  extinguishment,  are  those  in  which  the  ob- 
ligation is  in  the  nature  of  a  gratuity,  without  any  precedent  debt 
or  duty,  and  the  discharge  is  an  accidental  and  not  a  necessary 
consequence  of  the  tender  and  refusal,  there  being  no  debt  or 
duty  remaining  whereon  to  ground  an  action.     (6  Bac,  Abr.  456, 


608  DISCHARGE   OF   MORTGAGE 

title  Tender,  &c.,  F.)  If  there  is  a  precedent  debt,  as  a  loan  of 
money,  which  the  debtor  secures  by  a  mortgage  on  his  land,  con- 
ditioned for  payment,  though  by  a  tender  made  on  the  day  the 
land  is  freed  and  the  feoff er  may  enter  according  to  the  condition, 
the  debt  is  not  thereby  discharged,  and  may  be  recovered  by  ac- 
tion of  debt.  (Co.  Lit.  209,  a.)  The  effect  of  a  tender  on  the  day 
in  terminating  the  estate  of  the  mortgagee  cannot  be  denied,  be- 
cause it  is  a  legal  incident  of  his  estate.  Another  legal  incident  of 
that  estate  is  the  extinguishment  and  discharge  of  the  condition 
by  a  failure  to  comply  with  its  terms.  Upon  this  courts  of  equity 
raised  an  equitable  estate  in  the  mortgagor,  called  an  equity  of  re- 
demption, which  consisted  in  his  right  to  have  the  estate  of  the 
mortgagee  continued  as  a  security  for  the  debt,  notwithstanding 
the  default.  In  equity,  a  tender  will  stop  the  accruing  of  interest, 
and  will,  in  some  cases,  cast  upon  the  mortgagee  the  costs  of  a 
suit  for  redemption.  But  until  the  mortgagee  is  actually  paid  off 
by  his  own  consent,  or  by  the  decree  of  the  court,  he  retains  the 
character  of  the  mortgagee,  with  all  the  rights  incident  to  it. 
(Grugeon  v.  Gerrard,  4  Younge  &  Coll.,  Exch.,  119-128.) 

When  a  court  of  law  undertakes  to  deal  with  this  equitable  es- 
tate it  must  do  so  upon  principles  of  equity,  and  keep  in  view  the 
relief  which  would  be  afforded  in  equity,  and  protect  the  rights 
of  the  parties  accordingly.  The  recognition  of  this  equitable  es- 
tate has  been  obtained  in  courts  of  law  by  the  fiction  of  regarding 
the  mortgagee,  after  his  debt  is  satisfied,  as  a  trustee  of  the  legal 
estate  for  the  mortgagor.  Until  the  debt  is  paid,  the  legal  seisin 
of  the  mortgagee  is  not  a  mere  formal  title,  and  no  trust  will  be 
raised  for  the  benefit  of  the  mortgagor  until  the  purpose  for  which 
the  mortgage  was  made  is  answered. 

It  was  stated  on  the  argument  that  the  money  due  on  the  mort- 
gage was  brought  into  court  at  the  trial.  That  fact  does  not  ap- 
pear in  the  bills  of  exceptions.  It  is  not  necessary,  therefore,  to 
decide  whether  a  court  of  law  could  enforce  redemption  in  cases 
within  the  equity,  though  not  within  the  strict  letter  of  the  statute. 
The  English  courts  of  law  have  given  a  strict  construction  to  the 
corresponding  statute  of  7  George  II.,  ch.  20,  and  have  held  the 
circumstances  of  the  litigation  mentioned  in  the  preamble  and  in 
the  statute  to  be  jurisdictional  facts,  which  the  court  is  not  at 
liberty  to  disregard.  (Doe  v.  Clifton,  4  Ad.  &  El.  809;  Good-title 
V.  No-title,  11  Moore,  491;  Sutton  v.  Rawlings,  3  Exch.  407.)  The 
statute  should  be  strictly  construed,  and  is  not  applicable  to  any 
case  in  which  the  mortgagor  is  himself  the  actor.    It  was  designed 


TUTHILL    r.    MORRIS  600 

to  apply  only  in  certain  cases  mentioned  in  its  preiunble  and  in  the 
introductory  words  of  the  statute,  and  was  not  intended  to  sup- 
plant bills  for  redemption.  The  subject  is  one  that  falls  peculiarly 
within  the  jurisdiction  of  courts  of  equity.  The  remedy  there  is 
complete  by  bill  for  a  redemption,  and  relief  may  be  speedily 
obtained  by  the  exercise  of  the  undoubted  power  of  the  court,  by 
the  writ  of  assistance  to  carry  into  effect  its  decree,  by  putting-  the 
mortgagor  in  possession,  where  the  mortgagee  has  obtained  pos- 
session under  the  mortgage.  (Yates  v.  Humbly,  2  Atk.  363;  Green 
V.  Green,  2  Simons,  399,  406;  Bacon's  Ordinances  in  Chancery,  9; 
Valentine  v.  Teller,  Hopk.  C.  R.  422;  Devancene  v.  Devancene,  1 
Edw.  C.  R.  272;  Kershaw  v.  Thonipsoyi,  4  Johns.  C.  R.  609;  Schenck 
V.  Conover,  2  Beas.  221;  Fackler  v.  Worth,  lb.,  395;  Thomas  v. 
De  Baum,  1  McCarter,  37;  2  Dan.  Chan.  Prac.  1280.) 

It  is  not,  therefore,  essential  to  the  administration  of  justice 
that  courts  of  law  should,  in  the  absence  of  the  imperative  require- 
ments of  a  statute,  entertain  a  jurisdiction  that  pertains  to  courts 
of  equity,  in  the  exercise  of  which  equities  may  arise  that  a  court 
of  law  may  be  incompetent  to  deal  with. 

There  is  no  error  in  the  rulings  of  the  court  below,  and  the 
judgment  should  be  affirmed. 


TUTHILL  V.  MORRIS 

Court  of  Appeals  of  New  York,  1880 

(81  N.  Y.  94) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court,  in  the  Second  Judicial  Department,  affirming  a  judgment 
in  favor  of  plaintiff  entered  upon  a  decision  of  the  court  on  trial 
without  a  jury. 

This  action  was  brought  to  restrain  the  defendant  from  selling 
certain  premises  in  statutory  proceedings  to  foreclose  two  mort- 
gages thereon  and  to  have  the  same  adjudged  to  be  extinguished 
and  to  require  defendant  to  cancel  the  same  of  record,  on  the 
ground  that  the  amount  of  the  mortgages  was  duly  tendered  and 
refused. 

The  mortgages  were  executed  by  plaintiff.  The  mortgagees 
commenced  proceedings  to  foreclose  the  same  by  advertisement 
under  the  statute.  Pending  the  proceedings  they  assigned  the 
mortgages  to  defendant.     Defendant  requested  one  Steers,  an 


610  DISCHARGE    OF   MORTGAGE 

attorney,  to  attend  the  sale  for  him.  The  circumstances  and  the 
nature  of  the  employment,  together  with  the  occurrences  out  of 
which  the  alleged  cause  of  action  accrued,  are  set  forth  in  the 
opinion. 

Rapallo,  J.  The  uncontroverted  evidence  shows  that  Mr. 
Steers,  to  whom  the  tender  relied  upon  by  the  plaintiff  was  made, 
was  not  the  attorney  in  the  foreclosure  proceedings  nor  connected 
with  such  attorney,  nor  the  agent  of  Mr.  Morris,  except  for  the 
specific  purpose  for  which  he  was  employed;  that  his  first  and 
only  connection  with  Mr.  Morris  of  the  foreclosure  was  that  he 
was  requested,  on  behalf  of  Mr.  Morris,  to  go  to  the  place  of  sale 
and  engage  an  auctioneer,  and  to  attend  the  sale  and  see  that  it  was 
properly  conducted.  It  may  also  be  inferred  from  the  testimony 
that  he  was  instructed  that  the  sale  should  be  for  cash.  It  is  con- 
ceded by  the  respondent's  points  that  Mr.  Steers  had  no  express 
authority  to  receive  a  tender  and  that  none  "was  thought  of.  Mr. 
Steers  dic[  not  know  nor  was  he  informed  of  the  amount  due  for 
principal,  interest,  or  costs,  beyond  such  information  as  was  af- 
forded by  the  notice  of  sale,  nor  does  it  appear  that  he  had  any 
means  of  ascertaining  the  amount  of  the  costs.  He  was  not  empow- 
ered to  receive  the  purchase  money,  for  this  would  be  payable  only 
on  the  execution  of  the  deed  by  the  mortgagee.  When  he  arrived 
at  the  place  appointed  for  the  sale  he  was  presented  with  a  sum- 
mons, complaint  and,  order  of  injunction  in  an  action  by  the  plain- 
tiff against  Mr.  Morris,  but  declined  to  receive  or  admit  service 
thereof  on  behalf  of  Mr.  Morris,  on  the  ground  that  he  was  not 
his  attorney.  The  injunction  order  was  then  read  to  him.  It 
ordered  that  the  sale'  be  upon  the  terms,  among  others,  that  not 
more  than  10  per  cent,  of  the  amount  bid  be  paid  down.  He 
stated,  as  testified  to  by  the  plaintiff's  attorney,  that  he  was  in- 
structed to  sell  for  cash,  and  said  that  if  he  could  not  do  that  he 
should  adjourn  the  sale,  and  accordingly  instructed  the  auctioneer 
to  adjourn  the  sale  for  thirty  days.  After  he  had  announced  his 
intention  to  adjourn  the  sale,  but  before  he  had  instructed  the  auc- 
tioneer, and  as  he  was  about  doing  so,  the  alleged  tender  was 
made  by  Mr.  Tuthill,  one  of  the  plaintiff's  attorneys,  in  the  follow- 
ing manner,  as  testified  to  by  Mr.  Tuthill:  Mr.  Tuthill  testifies 
that  he  tendered  to  Mr.  Steers  a  quantity  of  greenbacks,  amount- 
ing, in  fact,  to  $6,300,  and  said  to  Mr.  Steers  that  he  tendered  the 
money  in  behalf  of  the  plaintiff  for  the  whole  amount  due.  That 
he  did  not  state  how  much  money  there  was,  but  tendered  it,  and 


TUTHILL    r.    MORRIS  611 

said  to  Mr.  Steers:  "I  want  to  pay  the  whole  amount  if  you  will 
let  me  know  how  much  it  is,"  and  Steers  replied  that  he  did  not 
know.  Witness  then  said:  "Will  you  take  this  money?"  and  he 
said  he  would  not,  and  asked  what  witness  wanted  to  pay  for,  and 
witness  said  that  he  wanted  to  pay  for  the  notes,  interest  and 
costs.  Immediately  after  this  conversation,  the  auctioneer,  under 
the  instruction  of  Mr.  Steers,  announced  the  adjournment  of  the 
sale  for  thirty  days. 

Mr.  Steers  testified  that  in  declining  to  receive  the  money  he 
stated  that  he  was  not  authorized  and  that  the  sale  was  adjourned. 

We  perceive  nothing  in  the  course  pursued  by  Mr.  Steers  indi- 
cating any  purpose  to  oppress  or  take  any  undue  advantage  of  the 
plaintiff.  By  the  adjournment  of  the  sale  the  plaintiff  was  re- 
lieved of  all  immediate  pressure,  and  ample  time  was  afforded,  if 
he  in  good  faith  desired  to  pay  off  the  mortgages,  to  seek  the 
proper  party  and  have  the  amount  of  interest  and  costs  ascertained. 
It  is  apparent  that  the  tender  made  was  a  complete  surprise,  and 
that  even  if  Mr.  Steers  had  authority  to  receive  payment  of  the 
mortgages  he  was  not  in  a  situation  to  do  so  at  that  time  or  place. 
It  is  by  no  means  clear  that  a  person,  not  the  attorney  in  the  pro- 
ceeding, but  merely  casually  employed  to  superintend  a  mortgage 
sale  and  see  that  it  is  properly  conducted,  is  by  such  employment 
authorized  to  receive  the  principal  of  the  mortgage;  but,  irre- 
spective of  that  point,  when  he  announces  that  he  is  ignorant  of 
the  amount  due  for  principal,  interest  and  costs,  and  it  is  evident 
that  he  has  not  the  means  of  information  at  hand  as  to  the  exact 
amount,  it  would  be  in  the  highest  degree  unreasonable  to  hold 
that  a  person  thus  situated  is  bound  to  take  the  responsibility 
of  accepting  or  refusing  a  tender,  and  that  his  refusal  discharges 
the  lien  of  the  mortgage.  Insisting  upon  the  immediate  accept- 
ance of  a  tender  under  such  circumstances,  and  when  the  sale  is 
about  to  be  adjourned,  indicates  rather  a  design  on  the  part  of  the 
mortgagor  to  take  an  unfair  advantage  of  the  mortgagee  than  to 
relieve  himself  from  oppression. 

Furthermore,  there  is  no  evidence  in  the  case  showing  that  the 
sum  tendered  was  the  full  amount  of  principal,  interest  and  costs. 
The  sum  tendered  is  said  to  have  been  S6,300.  The  amount  of 
principal  and  interest,  according  to  the  notice  of  sale,  was  $6,150 
and  upwards.  What  was  the  amount  of  the  costs  in  no  manner 
appears  in  the  case.  To  this  point  it  is  answered  that  Mr.  Steers 
did  not  object  that  the  amount  tendered  was  insufficient,  and  that 
the  plaintiff  was  ready  to  pay  whatever  amount  was  due.     But 


612  DISCHARGE    OF   MORTGAGE 

Mr.  Steers  did  state  that  he  was  ignorant  of  the  amount,  and  he 
did  not  occupy  such  a  relation  to  the  case  that  it  could  be  presumed 
that  he  knew  or  that  it  was  his  duty  to  know  the  precise  amount. 

Neither  does  it  appear  that  any  specific  amount  was  tendered. 
The  plaintiff's  witness,  Mr.  Tuthill,  exhibited  a  quantity  of  bills, 
but  he  admits  that  he  did  not  name  the  amount,  though  he  asked 
Mr.  Steers  to  count  them,  and,  taking  the  whole  evidence,  it  is  not 
clear  that  Mr.  Tuthill  offered  to  pay  the  whole  amount  he  had  in 
his  hand,  if  it  exceeded  the  amount  due.  When  asked  what  he 
wanted  to  pay,  he  replied,  "  the  notes,  interest  and  costs."  He  had 
previously  said  that  he  wanted  to  pay  the  whole  amount  if  Mr. 
Steers  would  let  him  know  how  much  it  was,  and  Steers  had  told 
him  he  did  not  know.  The  fair  construction  of  this  testimony 
is  that  he  desired  to  pay  the  amount  due  only,  and  before  pay- 
ing desired  to  be  informed  of  the  amount,  but  that  the  person  to 
whom  he  applied  had  not  the  means  of  giving  the  information. 

We  are  of  opinion  that  the  plaintiff  failed  to  make  out  a  tender 
to  the  defendant  and  a  refusal  which  discharged  the  lien  of  the 
mortgage.  In  view  of  the  serious  consequences  resulting  from 
the  refusal  of  such  a  tender,  the  proof  should  be  very  clear  that  it 
was  fairly  made  and  deliberately  and  intentionally  refused  by  the 
mortgagee,  or  some  one  duly  authorized  by  him,  and  that  suffi- 
cient opportunity  was  afforded  to  ascertain  the  amount  due.  At 
all  events,  it  should  appear  that  a  sum  was  absolutely  and  uncon- 
ditionally tendered  sufficient  to  cover  the  whole  amount  due.  The 
burden  of  that  proof  is  on  the  party  alleging  the  tender. 

But  even  if  a  sufficient  tender  had  been  made  out,  this  action 
could  not,  in  our  judgment,  be  maintained.  Although  the  authori- 
ties cited  sustain  the  proposition  that  when  a  tender  has  been 
duly  made  of  the  full  amount  due  it  will  discharge  the  lien  and  be 
a  good  defense  against  its  enforcement,  without  the  tender  being 
kept  good,  yet  we  are  clearly  of  opinion  that  it  should  be  kept  good 
in  order  to  entitle  the  mortgagor  to  the  affirmative  rehef  which  he 
seeks  in  this  action  and  which  the  judgment  awards  him,  viz.,  the 
extinguishment  of  the  mortgage.  A  party  coming  into  equity  for 
affirmative  relief  must  himself  do  equity,  and  this  would  require 
that  he  pay  the  debt  secured  by  the  mortgage,  and  the  costs  and  in- 
terest at  least  up  to  the  time  of  the  tender.  There  can  be  no  pre- 
tense of  any  equity  in  depriving  the  creditor  of  his  security  for  his 
entire  debt  by  way  of  penalty  for  having  declined  to  receive  pay- 
ment when  offered.  The  most  that  could  be  equitably  claimed 
would  be  to  relieve  the  debtor  from  the  payment  of  interest  and 


TUTHILL   V.    MORRIS  613 

costs  subsequently  accruing,  and  to  entitle  him  to  this  relief  he 
should  have  kept  his  tender  good  from  the  time  it  was  made.  If 
any  further  advantage  is  gained  by  a  tender  of  the  mortgage  debt 
it  must  rest  on  strict  legal  rather  than  on  equitable  principles. 
The  circumstance  that  a  security  has  become  or  is  invalid  in  law, 
and  could  not  be  enforced  even  in  equity,  does  not  entitle  a  party 
to  come  into  a  court  of  equity  and  have  it  decreed  to  be  surren- 
(.lered  or  extinguished  without  paying  the  amount  equitably  owing 
thereon.  Even  securities  void  for  usury  would  not  be  cancelled 
by  a  court  of  equity,  without  payment  of  the  debt  with  legal  inter- 
est, until,  by  statute,  it  was  otherwise  provided.  This  statute  does 
not  change  the  general  principle  of  equity,  but  on  the  contrary 
recognizes  it,  by  excepting  cases  of  usury  from  its  operation.  On 
this  ground,  even  if  the  alleged  tender  could  be  sustained,  the  plain- 
tiff was  not  entitled  to  a  decree  for  the  unconditional  extinguish- 
ment of  the  mortgage. 

We  are  of  opinion,  however,  as  already  stated,  that  no  sufficient 
tender  was  shown,  and  that  on  both  grounds  the  judgment  should 
be  reversed  and  a  new  trial  ordered,  costs  to  abide  the  event. 

All  concur. 

Judgment  reversed} 

1  Werner  v.  Tuch,  127  N.  Y.  217  v.    Moore,    9    Mich.    9    (1860) ;    Mc- 

(1891);  mison  v.  Loder,   132  N.  Y.  Clellan  v.  Coffin,  93  Ind.  456  (1883), 

288    (1892);    Cowles    v.    Marble,    37  contra. 
Mich.  158  (1877),  accord.    Moynahan 


CHAPTER  V   (continued) 
Section  II. — Other  Discharge  of  Debt 

DAVIS   V.   BATTINE 

High  Court  of  Chancery,  1830 

(2  Russ.  &  Myl.  76) 

A  CREDITOR  who  had  a  mortgage  security  for  his  debt  had  sued 
the  debtor,  and  taken  him  in  execution.  The  debtor  afterwards 
took  the  benefit  of  the  Insolvent  Act. 

On  an  exception  to  the  Master's  report,  the  question  was  raised 
whether  the  debt  was  not  satisfied  by  the  body  of  the  debtor  having 
been  taken  in  execution,  so  as  to  extinguish  the  hen  of  the  creditor 
on  the  land. 

The  Master  of  the  Rolls  [Sir  John  Leach]  said  he  did  not 
remember  to  have  heard  it  ever  suggested  that  a  mortgagee,  by  pro- 
ceeding to  execution  against  the  body  of  the  debtor,  released  his 
interest  in  the  land;  and  he  overruled  the  exception. 

BUTLER  V.  MILLER 

Court  of  Appeals  of  New  York,  1848 

(1  .V.  Y.  496) 

This  was  an  action  of  trover  brought  in  the  Supreme  Court 
by  Butler  and  Vosburgh  against  Miller  for  a  number  of  horses, 
cattle  and  hogs,  and  a  quantity  of  farming  utensils,  and  other 
property.  The  cause  was  first  tried  before  Cushman,  late  Cir- 
cuit Judge,  at  the  Columbia  Circuit,  in  September,  1843,  when 
a  verdict  was  had  for  the  plaintiffs,  which  was  set  aside  by  the 
Supreme  Court  and  a  new  trial  ordered.  (See  1  Denio,  407.)  A 
second  trial  was  had  before  Parker,  Circuit  Judge,  in  March, 
1846,  and  on  that  trial  the  case  was  as  follows: — 

The  plaintiffs  gave  in  evidence  a  chattel  mortgage  upon  the 
property  in  question,  executed  to  them  by  one  Abraham  B.  Van- 
614 


BUTLER   V.    MILLER  615 

derpoel,  dated  April  19,  1842,  which  had  been  duly  filed  in  the 
proper  town  clerk's  office.  The  instrument  recited  that  Vander- 
poel  was  indebted  to  the  plaintiffs  in  the  sum  of  $498.72,  being 
the  amount  of  three  promissory  notes  made  by  Vanderpoel,  and 
held  by  the  plaintiffs,  and  the  mortgage  was  to  become  void  if 
Vanderpoel  should  pay  the  debt  by  the  first  day  of  October  then 
next.  Evidence  was  given  tending  to  show  a  just  consideration 
for  the  notes.  At  the  time  the  mortgage  was  given  the  property 
was  on  the  farm  of  the  mortgagor,  and  was  used  by  one  Mosher, 
who  worked  the  farm  on  shares,  under  an  agreement  by  which 
Vanderpoel  was  to  furnish  teams,  stock  and  utensils.  After  the 
mortgage  was  given  the  property  remained  on  the  farm,  and  was 
used  as  before.  On  the  15th  day  of  July,  1842,  the  defendant,  as 
sheriff  of  the  county  of  Columbia,  sold  the  property  in  question 
by  virtue  of  an  execution  against  Vanderpoel,  in  favor  of  the  La- 
fayette Bank,  which  was  delivered  to  the  sheriff  on  the  5th  of 
May,  1842.  The  evidence  tended  to  show  that  the  plaintiffs  as- 
serted their  claim  under  the  mortgage  at  the  sale,  and  forbid  the 
sale. 

It  also  appeared  that  on  the  7th  of  IVIay,  1842,  the  plaintiffs 
took  from  Vanderpoel  a  bond  and  warrant  of  attorney  for  the 
amount  of  the  notes  secured  by  the  mortgage,  upon  which  judg- 
ment was  entered  in  the  Supreme  Court  on  the  same  day,  and 
execution  thereon  was,  by  Vanderpoel's  consent,  issued  immedi- 
ately to  one  of  the  deputies  of  the  sheriff  aforesaid.  It  was  also 
proved,  after  objection  duly  made  and  exception  by  the  defend- 
ant's counsel,  that  it  was  agreed  between  the  plaintiffs  and  Vander- 
poel that  the  judgment  should  be  taken  as  collateral  to  the  mort- 
gage. The  plaintiffs'  execution,  soon  after  it  was  issued,  was  levied 
upon  the  property  in  question,  and  the  property  was  advertised 
for  sale  both  under  that  execution  and  the  one  above  mentioned 
in  favor  of  the  Lafayette  Bank. 

It  also  appeared  that  after  the  sheriff's  sale  above  mentioned 
the  plaintiffs  made  a  motion  in  the  Supreme  Court  for  an  order 
requiring  the  defendant,  as  such  sheriff,  to  apply  the  proceeds  of 
the  sale  on  the  judgment  and  execution  in  their  favor.  This  mo- 
tion was  based  upon  an  allegation  that  the  execution  of  the  La- 
fayette Bank,  when  first  delivered  to  the  sheriff,  was  directed  to 
the  sheriff  of  the  county  of  Hudson  (there  being  in  fact  no  such 
county),  and  that  the  error  was  corrected  and  the  execution  re- 
delivered to  the  sheriff  after  the  execution  of  the  plaintiffs  was 
issued.    The  motion  was  denied  with  costs. 


616  DISCHARGE    OF   MORTGAGE 

The  defendant's  counsel  requested  the  Circuit  Judge  to  decide 
and  charge  the  jury:  1.  That  the  mortgage  under  which  the  plain- 
tiffs claimed  was  fraudulent  and  void  as  against  the  judgment  and 
execution  of  the  Lafayette  Bank.  2.  That  the  judgment  taken  by 
the  plaintiffs  on  the  7th  of  May,  1842,  for  the  same  notes  secured 
])y  the  mortgage,  merged  the  notes  and  extinguished  the  lien  of 
the  mortgage.  3.  That  the  issuing  of  execution  upon  that  judg- 
ment, the  levy  upon  the  mortgaged  property,  and  the  motion  to 
the  Supreme  Court  to  have  the  proceeds  of  the  sheriff's  sale  ap- 
plied upon  that  execution,  were  severally  acts  inconsistent  with 
any  claim  under  the  mortgage,  and  destroyed  all  right  to  assert 
any  such  claim. 

The  Circuit  Judge  ruled  that  the  question  of  fraud  was  one  of 
fact  for  the  jury  to  decide.  That  the  judgment  was  not  a  merger 
or  extinguishment  of  the  mortgage,  if  it  was  taken  as  collateral 
merely;  if  not  so  taken,  then  that  it  was  a  merger.  Upon  the  3d 
proposition  he  refused  to  charge  as  requested.  The  defendant  ex- 
cepted, and  the  jury  gave  their  verdict  for  the  plaintiffs.  The  de- 
fendant moved  in  the  Supreme  Court  for  a  new  trial  on  bill  of  ex- 
ceptions, which  was  granted  by  that  court.  The  plaintiffs  appealed 
to  this  court  under  the  judiciary  act  of  December,  1847. 

Johnson,  J.  The  question  of  the  ho7id  fides  of  the  mortgage 
was  properl}^  submitted  to  the  jury,  and  their  verdict  in  favor  of 
the  honesty  and  fairness  of  the  transaction  is  conclusive  according 
to  all  the  cases  since  Smith  v.  Acker,  23  Wend.  653. 

The  Circuit  Judge  was  requested  to  charge  the  jury  that  the 
subsequent  judgment  on  the  notes  operated  as  a  merger  of  the 
notes  and  consequently  avoided  the  mortgage.  The  Judge,  how- 
ever, charged  that  the  judgment  did  operate  as  a  merger  of  the 
notes  and  mortgage  unless  it  was  satisfactorily  shown  that  the 
judgment  was  taken  as  collateral  to  the  mortgage,  in  which  case 
it  was  not  a  merger. 

The  charge  upon  this  point  was  in  strict  accordance  with  the 
rule  laid  down  by  the  Supreme  Court  (1  Denio,  407)  when  this 
cause  was  before  it  on  a  former  trial,  and  must  be  regarded  as  cor- 
rect unless  that  court  was  then  in  error  as  to  the  true  rule  upon 
the  subject.^ 

i"If  then  the  judgment  was  in-  mortgage   were   not   merged    in    or 

tended  as  a  collateral  security  to  the  extinguished  by  the  judgment,   but 

notes  and  mortgage  before  executed,  remained  a  valid  conveyance  under 

it  would  be  clear  that  the  notes  and  which  the  plaintiffs  could  make  title 


BUTLER    V.    MILLER  617 

It  may,  perhaps,  well  be  doubted  whether  the  judgment  was  a 
security  of  a  higher  nature  than  the  personal  mortgage;  and,  even 
if  it  were,  whether  it  would  operate  to  extinguish  the  mortgage 
and  divest  the  mortgagees  of  the  title  they  had  acquired  under  it. 
It  will  scarcely  be  contended  that  in  case  the  notes  in  question  had 
been  secured  by  a  mortgage  upon  real  estate,  a  judgment  upon 
them  would  have  extinguished  such  mortgage.  And  yet  a  mort- 
gage upon  real  estate  is  a  mere  security  and  incumbrance  upon 
the  land  and  gives  the  mortgagee  no  title  or  estate  therein  what- 
ever. Whereas  a  personal  mortgage  is  more  than  a  mere  security. 
It  is  a  sale  of  the  thing  mortgaged,  and  operates  as  a  transfer  of 
the  whole  legal  title  to  the  mortgagee,  subject  only  to  be  defeated 
by  the  full  performance  of  the  condition.  And  if  it  be  conceded 
that  a  judgment  upon  the  original  indebtedness  would  not  extin- 
guish a  collateral  security  for  its  payment  upon  real  estate,  I  do 
not  see  how  it  could  divest  a  title  to  personal  property  acquired 
by  purchase.  A  vested  legal  title,  whether  in  real  or  personal 
property,  is  the  highest  of  all  securities— certainly  higher  than 
the  mere  lien  of  a  judgment  upon  land,  or  the  right  of  a  plaintiff 
to  personal  property  acquired  by  levy  under  an  execution. 

Although  it  is  clear  that  the  notes  were  merged  in  the  judgment 
])y  operation  of  law,  it  does  not,  as  I  think,  certainly  follow  that 
all  the  collateral  securities  would  be  extinguished.  The  debt  is 
not  yet  satisfied.  The  notes  may  have  been  cancelled,  but  the 
debt  was  not,  and  until  that  is  done  it  seems  to  me  that  all  mere 
collateral  securities,  whether  upon  real  or  personal  property, 
should  be  allowed  to  stand,  especially  titles  to  property  acquired 
under  instruments  where  the  parties  stand  in  the  relation  of 
vendor  and  purchaser  without  fraud.  The  rule  that  security  of  a 
higher  nature  extinguishes  inferior  securities  will  be  found,  I  ap- 
prehend, only  to  apply  to  the  state  or  condition  of  the  debt  itself, 
and  means  no  more  than  this — that  when  an  account  is  settled  by 
a  note,  a  note  changed  to  a  bond,  or  a  judgment  taken  upon  either, 
the  debt  as  to  its  original  or  inferior  condition  is  extinguished  or 
swallowed  up  in  the  higher  security;  and  that  all  the  memorandums 
or  securities  by  which  such  inferior  condition  was  evidenced  lose 

to  the  property  mortgaged  and  sus-  the    same    debt,    and    this    appears 

tain    their   action.     [But]    the   judg-  on  the  face  of  the  securities.     Does 
ment,  which  is  a  higher  security  than     ■  not  the  law  presume  that  the  judg- 

the   notes  and  mortgage,   or  either  ment  was  taken  in  satisfaction  of  the 

of  them,  was  between  the  same  par-  original  debt?    I  am  of  opinion  that  it 

ties.    It  was.  so  far  as  the  plaintiffs,  does."— Per  Jewett,  J.,   in  opinion 

the  mortgagees,   are  concerned,   for  in  the  Supreme  Court  (pp.  412,  413). 


618  DISCHARGE    OF    MORTGAGE 

their  vitality.  It  has  never  been  applied,  and  I  think  never  should 
be,  to  the  extinguishment  of  distinct  collateral  securities,  whether 
superior  or  inferior  in  degree.  These  are  to  be  cancelled  by  satis- 
faction of  the  debt  or  voluntary  surrender  alone."  This  most  ob- 
vious and  rational  distinction  seems  to  have  been  overlooked  by 
the  Supreme  Court  in  the  opinion  to  which  I  have  referred. 

It  is  unnecessary,  however,  to  decide  the  question  here  discussed, 
as  it  was  put  to  the  jury  substantially  to  find  whether  it  was 
agreed  or  intended  by  the  parties  in  entering  up  the  judgment  to 
cancel  the  mortgage;  and  I  admit  that  if  such  had  been  the  agree- 
ment and  intention,  there  was  sufficient  consideration  to  support 
it,  and  that  the  mortgage  must  have  yielded  to  the  superior  force 
of  the  agreement,  whether  express  or  implied. 

The  jury  have  determined  by  their  verdict  that  the  parties  to 
the  mortgage  did  not  intend  to  cancel  it,  and  that  notwithstanding 
the  judgment  it  remained  a  valid  subsisting  security. 

Thus  far,  then,  it  seems  to  be  established  by  the  verdict  that,  at 
least  up  to  the  time  of  the  execution  being  placed  in  the  hands  of 
the  sheriff  by  the  plaintiffs,  the  mortgage  was  a  valid  instrument 
in  their  hands,  and  vested  in  them  the  legal  title  to  all  the  property 
it  purported  to  convey,  subject  to  be  defeated  only  by  payment 
and  satisfaction,  or  voluntary  waiver  or  surrender. 

It  remains  to  be  seen  whether  the  plaintiffs  have  in  any  way 
divested  themselves  of  their  title  to  the  property  thus  acquired, 
or  been  guilty  of  any  acts  which  would  authorize  the  court  to 
estop  them  from  asserting  their  rights  under  the  mortgage. 

[The  learned  Judge  examines  this  question  at  length,  and  comes 

to  the  conclusion  that  the  plaintiffs  have,  by  pursuing  their  remedy 

under  the  judgment,  so  dealt  with  the  property  in  question  as  to 

preclude  themselves  from  setting  up  their  title  to  it  under  the 

mortgage.] 

New  trial  granted. 

BUSH  V.   COOPER 

High  Court  of  Errors  and  Appeals  of  Mississippi,  1853 

(26  Miss.  599) 

Mr.  Justice  Handy  delivered  the  opinion  of  the  court. 

This  bill  was  filed  by  the  appellee  (Cooper)  in  the  Superior  Court 
of  Chancery,  to  foreclose  a  deed  in  trust  executed  by  the  appellant 
(Bush)  on  the  17th  March,  1840,  conveying  certain  real  estate  in 
the  town  of  Port  Gibson  to  trustees  to  secure  the  payment  of  two 


BUSH   V.    COOPER  619 

promissory  notes  made  by  the  appellant,  and  afterwards  trans- 
ferred to  the  appellee.  The  facts  necessary  to  be  taken  into  view  in 
considering  the  questions  presented  for  determination  are  as  fol- 
lows : — 

The  notes  secured  by  the  trust  deed  were  due  in  January  and 
February,  1841;  and  in  November,  1842,  a  judgment  at  law  was 
rendered  upon  them  against  Bush,  which  judgment  and  the  deed 
in  trust  were  afterwards  transferred  to  the  appellee,  and  remain  un- 
paid. The  deed,  in  convejdng  the  property,  contains  the  words 
"grant,  bargain,  and  sell,"  but  contains  no  other  covenant  of  war- 
ranty in  express  terms. 

The  appellant  was  discharged  as  a  bankrupt  in  February,  1843; 
and  in  October,  1844,  he  purchased  the  property  embraced  in  the 
deed  in  trust  at  sheriff's  sale,  under  an  execution  on  a  judgment 
rendered  in  June,  1838,  against  the  appellant,  and  which  was  un- 
satisfied, for  the  sum  of  $1,033,  by  means  acquired  by  him  after 
his  discharge  as  a  bankrupt ;  and  in  virtue  of  that  purchase,  he  now 
claims  to  hold  the  property  by  title  paramount  to  the  lien  of  the 
deed  in  trust.  On  the  contrary,  the  appellee  claims  that  the  prop- 
erty is  subject  to  the  payment  of  the  debt  secured  by  the  deed  in 
trust,  notwithstanding  the  discharge  of  the  appellant  as  a  bankrupt, 
and  that  the  appellant's  purchase,  under  the  prior  incumbrance, 
cannot  be  set  up  by  him  to  defeat  the  security  of  the  deed  in  trust. 

The  first  question  to  be  settled  is,  whether  the  discharge  of  the 
appellant  from  the  debt,  by  his  certificate  as  a  bankrupt,  extin- 
guished the  deed  in  trust. 

It  is  insisted  on  his  behalf  that  the  deed  was  but  a  mere  incident 
to  the  debt,  and  that  whatever  discharged  the  debt  necessarily  de- 
stroyed the  deed,  because  the  security  could  not  exist  where  the 
debt,  which  was  its  foundation  and  support,  was  discharged.  This 
is  undoubtedly  well  sustained  by  modern  decisions,  as  a  general 
rule,  but  it  is  not  without  exceptions.  It  is  held  to  apply  in  all 
cases  where  the  debt  has  been  actually  paid,  or  where  it  was  not 
supported  by  a  valid  legal  consideration,  or  where  the  debtor 
ex  cequo  et  bono  is  discharged  from  its  payment.  But  it  is  held 
not  to  apply  to  a  case  where  an  action  upon  the  debt  has  been 
barred  bj'-  the  statute  of  limitations,  and  that  the  creditor  may  pro- 
ceed to  foreclose  his  mortgage,  notwithstanding  the  bar  of  the  debt 
by  the  statute.  {Miller  v.  Helm,  2  S.  &  M.  697;  Miller  v.  Trustees 
of  Jefferson  College,  5  76.  650;  Bank  Metropolis  v.  Guttschlick,  14 
Peters,  19;  Thayer  v.  Mami,  19  Pick.  535.) 

In  addition  to  this,  the  objection  is  fully  met  by  the  second  sec- 


620  DISCHARGE    OF   MORTGAGE 

tion  of  the  bankrupt  act  of  Congress  of  1841,  which  provides  that 
"nothing  in  the  act  shall  be  construed  to  annul,  destroy,  or  im- 
pair any  lawful  i-ights  of  married  women  or  minors,  or  any  liens, 
mortgages,  or  other  securities  on  property,  real  or  personal,"  &c. 
From  this  it  is  manifest  that,  while  the  privilege  was  granted  to  the 
debtor  to  be  personally  discharged  from  the  debt,  any  security 
which  the  creditor  might  have,  consisting  of  a  lien  on  property, 
was  left  in  as  full  force  as  though  the  debtor  had  never  been  dis- 
charged from  the  debt,  for  the  security  of  which  the  lien  was  made. 

The  second  question,  then,  presented  is.  Whether  Bush  is  es- 
topped by  the  deed  from  setting  up  his  title  acquired  under  the 
judgment,  which  was  a  lien  existing  at  the  date  of  the  deed,  in 
opposition  to  the  title  conveyed  by  the  deed?  This  is  a  question  of 
great  importance  in  its  direct  and  collateral  bearings,  and  it  has 
been  carefully  considered  by  the  court. 

[The  Court  then  discusses  at  length  the  question  of  the  effect  of 
the  appellant's  discharge  in  bankruptcy  upon  the  estoppel  arising 
from  the  covenants  in  his  deed  of  trust,  and  concludes  as  follows :] 

It  follows  from  this  view  of  the  subject  that  the  appellant  was 
not  discharged  from  his  covenants  in  the  deed,  and  consequently 
that  he  is  estopped  from  setting  up  his  subsequently  acquired  title 
against  the  claim  of  the  appellee.  As  a  legal  proposition  this  con- 
clusion is  well  sustained  by  expositions  given  to  the  bankrupt  laws 
by.  very  high  authorities.  In  an  equitable  point  of  view,  the  po- 
sition of  the  appellant  would  not  be  more  favored.  After  having 
pledged  the  property  as  a  security  for  the  payment  of  the  debt,  he 
would  scarcely  be  heard,  in  point  of  mere  equity,  to  set  up  a  claim 
to  the  same  property,  founded  on  the  existence  of  a  prior  lien  which 
he  had  covenanted  against,  and  thereby  deprive  his  creditor  of  the 
security  he  had  given,  and  appropriate  the  property  to  himself.  • 

The  decree  of  the  chancellor  is  affirmed.^ 

PRATT   V.   HUGGINS 

Supreme  Court  of  New  York,  1859 

(29  Barb.  277) 

HoGEBOOM,  J.  The  facts  of  this  case  lie  within  a  narrow  com- 
pass. The  plaintiff,  by  action  commenced  in  1855,  seeks  to  fore- 
close a  mortgage  under  seal,  executed  in  1835,  for  a  debt  falling 
due  in  1836,  which  mortgage  was  accompanied  by  a  promissory 

1  See,  Chamberlain  v.  Meeder,  16  N.  H.  381  (1844). 


PRATT   V.    HUGGINS  621 

(unsealed)  note  to  secure  the  same  debt.  The  mortgage  contains 
no  covenant  to  pay,  but  the  condition  is  that  the  instrument  shall 
be  void  if  the  above  sum,  with  interest,  is  paid  on  the  1st  of  Feb- 
ruary, 1836,  "in  the  manner  particularly  specified  in  the  condi- 
tion of  his  (the  mortgagor's)  certain  bond  or  obligation  bearing 
even  date  herewith."  The  mortgage  was  duly  acknowledged  and 
recorded.  The  answers  interposed  several  defenses;  and  among 
others,  the  defense  of  payment;  and  that  the  plaintiff's  cause  of 
action  was  barred  by  the  statute  of  limitations,  in  consequence  of 
its  not  accruing  within  six  years  before  suit  brought.  The  justice 
before  whom  the  cause  was  tried,  without  a  jury,  came  to  the 
conclusion,  upon  the  evidence,  that  there  was  an  unpaid  balance 
due  on  the  note,  and  that  he  should  have  given  judgment  for  the 
plaintiff  but  for  the  fact  that  more  than  six  years  had  elapsed  since 
the  said  note  became  due,  and  the  cause  of  action  thereon  accrued 
prior  to  the  commencement  of  this  suit ;  and  for  that  reason  he  gave 
judgment  for  the  defendants.  The  case  therefore  presents  the 
question  whether  a  debt  secured  by  a  sealed  mortgage  and  an  un- 
sealed note  can  be  enforced  by  a  foreclosure  of  the  mortgage,  after 
the  expiration  of  six  but  before  the  expiration  of  twenty  years  from 
the  time  when  the  debt  became  due.  As  has  been  said,  there  is  no 
covenant  in  the  mortgage  to  pay  the  debt;  but  at  the  same  time  the 
debt,  its  amount  and  the  time  of  payment,  are  specified  in  the 
mortgage;  and  it  is  provided  that  in  case  "default  shall  be  made 
in  the  payment  of  all  or  any  part  of  the  said  principal  sum  of 
two  hundred  and  fifty  dollars,  or  the  interest  thereof,  at  the  time 
or  times  when  the  same  ought  to  be  paid  as  aforesaid,  that  then, 
and  in  such  case,"  the  mortgagee  may  sell  and  dispose  of  the 
premises,  &c.  The  true  question,  therefore,  would  seem  to  be, 
has  the  mortgage  been  paid?  or,  rather,  in  this  case,  is  the  lapse  of 
six  years  since  the  maturity  of  the  note,  without  any  subsequent 
recognition  or  acknowledgment  of  the  debt,  conclusive  evidence  of 
payment?  The  justice  trjdng  the  cause  has  come  to  the  conclu- 
sion, upon  the  evidence,  that  a  part  of  the  debt  is  actually  unpaid. 
Is  there  a  legal  bar  to  giving  effect  to  that  conclusion  by  rendering 
judgment  for  the  plaintiff,  in  consequence  of  the  lapse  of  time  before 
mentioned?  If  this  is  substantially  an  action  upon  the  note,  then 
it  is  barred,  for  it  is  an  action  upon  simple  contract  and  must  be 
brought  within  six  years.  (Code,  §  90.)  And  the  plaintiff  in 
such  case  fails,  not  because  the  debt  is  in  fact  shown  to  be  paid,  but 
because  the  law  forbids  the  action.  The  remedy  is  taken  away. 
But  this  is  not  in  terms  or  effect  an  action  upon  the  note.    The 


622  DISCHARGE    OF   MORTGAGE 

mortgage  would  be  good  without  the  note.  If  there  had  been  no 
note,  but  only  the  evidence  of  the  debt  recognized  in  the  mortgage, 
is  there  any  doubt  that  the  mortgage  could  have  been  enforced 
after  the  debt  became  due,  and  for  twenty  years  afterwards?  The 
only  question  would  be,  was  there  a  debt  remaining  unpaid — a 
security  upon  real  estate — and  was  the  lien  enforced  during  the 
period  that  the  law  gives  it  legal  existence?  The  additional  recog- 
nition of  the  debt,  in  the  shape  of  a  promissory  note,  ought  not  to 
detract  from  its  force.  It  is  said  that  the  note  is  the  principal,  and 
the  mortgage  only  the  incident;  that  is,  that  it  is  given  only  as  a 
security  for  the  note.  In  a  certain  sense,  this  is  true.  But  in  fact 
the  debt  itself  is  the  principal  thing,  and  the  note  is  one  form  of 
security  for,  or  evidence  of,  the  debt,  and  the  mortgage  another. 
Suppose  the  mortgage  contained  a  covenant  to  pay  the  debt,  would 
it  be  any  the  less  the  principal  thing  than  the  note?  True,  the  note 
(if  negotiable)  would  have  some  facilities  for  an  easy  transfer,  and 
might  be  negotiated  independent  of  the  mortgage.  If  so  trans- 
ferred, it  would  in  law  carry  the  mortgage  with  it,  and  so  would 
the  mortgage  carry  the  note  with  it.  The  payment  of  either  would 
be  the  payment  of  the  other,  except  so  far  as  a  bond  fide  holder  of 
the  note  for  value  is  concerned,  who  might,  under  the  law  appli- 
cable to  commercial  paper,  be  protected.  It  is  said  that  the  note, 
from  the  lapse  of  time,  is  presumed  to  be  paid.  Not  altogether  so; 
for  the  law  allows  a  suit  upon  it  and  a  recovery,  unless  the  statute 
of  limitations  is  pleaded.  It  is  therefore,  at  most,  but  a  presump- 
tion; suffered  to  be  overthrown,  it  is  true,  only  in  one  way,  and  that 
is,  by  proof  of  payment  thereon,  or  recognition  thereof,  in  the  way 
pointed  out  in  the  statute.  This,  however,  as  before  stated,  only 
acts  upon  the  remedy.  It  is  an  arbitrary  and  an  artificial  rule, 
not  to  be  carried,  I  think,  beyond  the  well-defined  limits  of  the 
statute  itself.  The  case  of  Jackson  v.  Sackett,  7  Wend.  94,  is  much 
relied  on  as  decisive  authority  in  support  of  the  bar.  That  was 
ejectment  upon  a  forfeited  mortgage,  secured  also  by  a  note.  The 
tenor  of  Mr.  Justice  Sutherland's  able  opinion  is  towards  regard- 
ing the  lapse  of  six  years,  unexplained,  as  sufficient  evidence  of  pay- 
ment. But  he  held  that  the  bar  was  not  absolute,  and  that  circum- 
stances tending  to  show  that  the  note  was  unpaid  were  proper  for 
the  consideration  of  the  jury,  and  a  new  trial  was  in  fact  granted 
for  withdrawing  the  case  from  the  jury.  We  are  not  precisely  ap- 
prised by  the  case  at  bar  what  circumstances  here  exist;  but  we  are 
told  in  the  case  itself  that  the  plaintiff  gave  evidence  "tending  to 
show  that  there  was  due  upon  the  mortgage  about  the  sum  of 


PRATT   V.    HUGGINS  623 

that  no  part  of  the  said  sum,  or  the  interest  thereon,  had  been 
paid."  And  the  judge  also  says,  "I  am  entirely  satisfied  from  the 
evidence  that  there  is  an  unpaid  balance  due  on  the  note,  and 
should  have  decided  in  the  plaintiff's  favor,  except  for  the  legal 
bar  above  stated."  The  late  chancellor  (Walworth)  doubts,  and 
even  denies,  the  authority  of  the  last  cited  case,  in  Heyer  v.  Pruyn, 
7  Paige,  465,  and  goes  so  far  as  to  say  that  it  "cannot  be  law." 
The  cases  in  Massachusetts  and  Connecticut,  and  one  in  Kentucky, 
hold  that  notwithstanding  that  "the  note  msiy  be  barred  by  the 
statute  of  limitations,  yet  if  it  has  not  been  paid,  the  mortgagee  has 
his  remedy  on  the  mortgage."  {Thayer  v.  Mann,  19  Pick.  535; 
Bush  V.  Cooper,  26  Miss.  [4  Cush.]  599;  Eastman  v.  Foster,  8  Mete. 
535;  Buldwin  v.  Norton,  2  Conn.  163;  14  B.  Monroe  [Kentucky], 
307.  See  also  2  Cox's  Chancery  Cases,  125;  Spears  v.  Hartly,  3 
Esp.  R.  81,  2;  Hilliard  on  Mortgages,  21,  22.)  The  case  of  the 
Ba7ik  of  the  Metropolis  v.  Guttschlick,  14  Peters,  19,  declares  a 
kindred  and  nearly  analogous  principle.  The  case  of  Waltermire 
V.  Westover,  14  N.  Y.  R.  16,  has  also,  particularly  in  the  reasoning 
of  Mr.  Justice  Selden,  some  bearing  upon  the  present  case.  In 
that  case  the  lien  of  a  justice's  judgment,  which  according  to  the 
statute  would  be  barred  after  six  years  for  the  purpose  of  bringing 
an  action  thereon,  was,  when  a  transcript  was  filed  in  the  county 
clerk's  office,  recognized  as  of  equal  validity  and  duration  with  that 
of  a  judgment  originally  entered  in  the  common  pleas,  and  ex- 
tended to  ten  years  as  against  subsequent  creditors.  It  is  true 
much  stress  was  laid  upon  the  language  of  the  statute  giving  such 
a  judgment  the  same  force  and  effect  as  a  judgment  of  the  common 
pleas,  but  much  stress  was  also  laid  upon  the  fact  that  there  was 
nothing  to  prevent  the  enforcement  of  such  a  lien,  except  the  lan- 
guage of  the  law  of  limitations;  and  it  was  considered  that  that 
language  might  be  appropriately  limited  to  cases  directly  within 
its  terms;  that  there  was  reason  for  saying  that  the  debt  still  re- 
mained, notwithstanding  the  statute  had  cut  off  the  remedy  when 
resorted  to  in  the  shape  of  an  action.  A  distinction  was  drawn 
between  the  institution  of  a  suit  upon  the  justice's  judgment  and 
the  enforcement  of  it  as  a  lien  upon  real  estate;  and  I  think  here 
a  distinction  may  be  drawn  between  an  action  upon  the  note  for 
the  purpose  of  enforcing  a  personal  liability  and  an  action  upon 
the  mortgage  for  the  purpose  of  enforcing  the  lien  upon  the  real 
estate.  This  question,  in  this  State,  may  be  said  to  be  nearly  res 
nova,  and  I  feel  authorized  to  follow  the  weight  of  judicial  author- 
ity elsewhere,  resting,  as  I  think  it  does,  upon  principle,  especially 


C24  DISCHARGE   OF   MORTGAGE 

as  the  case  in  7th  Wendell  is  not  directly  hostile  to  the  rule  here 
suggested.     The  judgment  should  be  reversed  and  a  new  trial 
granted,  with  costs  to  abide  the  event. 
Wright,  J.,  concurred.' 

New  trial  granted} 


BORST  V.  COREY 

Court  of  Appeals  of  New  York,  1857 

(15  A^.  F.  505) 

On  the  tenth  of  August,  1837,  the  plaintiff  and  the  defendant, 
Samuel  Newkirk,  as  executors  of  the  last  will  and  testament  of 
James  Halliday,  deceased,  conveyed  to  the  defendant,  David  P. 
Corey,  a  piece  of  land  in  Montgomery  county  for  $1,600,  subject, 
however,  to  a  mortgage  thereon  for  about  $635,  and  this  action 
was  commenced  August  5th,  1847,  in  the  Supreme  Court,  on  the 
equity  side,  to  obtain  a  sale  of  the  premises,  by  virtue  of  the  equi- 
table lien  for  the  purchase  price.  The  complaint  in  the  action  set 
forth  the  conveyance  of  the  premises  by  the  executors,  alleged  that 
no  part  of  the  purchase  price  had  been  paid  by  the  grantee  except 
the  amount  of  the  mortgage,  and  asked  for  a  decree  that  the 
premises  be  sold  and  the  purchase  price  and  interest  be  paid  from 
the  proceeds  of  the  sale.  The  complaint  further  alleged  that  the 
executor,  Newkirk,  had  refused  to  join  with  the  plaintiff  in  the 
commencement  and  prosecution  of  the  action,  and  was  therefore 
made  a  defendant. 

The  defendant,  Newkirk,  suffered  the  bill  to  be  taken  as  con- 
fessed. The  defendant  Corey,  by  his  answer,  alleged  that  prior 
to  the  delivery  of  the  deed  to  him  he  paid  the  purchase  price  of  the 
land  in  full,  except  the  amount  of  mortgage  thereon,  and  had 
subsequently  paid  the  mortgage;  and  that  he  had  not,  at  any  time 
within  six  years  next  prior  to  the  commencement  of  the  action, 
l)een  indebted  to  the  executors  or  either  of  them,  for  or  on  account 
of  the  purchase  price  of  the  premises,  or  promised  to  pay  the 
same;  and  that  no  cause  of  action  had  accrued  for  the  same  within 
the  six  years.    To  this  answer  a  general  replication  was  put  in. 

The  action  was  tried  before  referees,  and  they  found  that  more 

1  Concurring  opinion  of  Gould,  J.,  160  (1836);  Hulbert  v.  Clark,  128 
omitted.  N.  Y.  295  (1891). 

2  See,  Belknap  v.  Gleason,  11  Conn. 


BORiST   V.    COREY  625 

than  six  years  had  elapsed  since  the  sale  of  the  premises  in  qiws- 
tion,  prior  to  the  commencement  of  the  action,  and  decided  that 
the  plaintiff  be  nonsuited,  on  the  ground  that  the  cause  of  action, 
to  enforce  which  the  suit  was  brought,  was  barred  by  the  statute 
of  limitations.  No  bond  or  mortgage,  or  other  written  instrument, 
was  taken  to  secure  the  payment  of  the  purchase  price  of  the  land, 
and  it  does  not  appear  that  any  credit  was  given  therefor. 

Judgment  having  been  entered  on  the  report,  the  plaintiff  ap- 
pealed therefrom;  the  Supreme  Court,  at  general  term,  iti  the 
third  district,  affirmed  the  judgment,  and  the  plaintiff  appealed 
to  this  court. 

BowEN,  J.  The  purchase  price  of  the  land  in  question  was  due 
and  payable  on  the  conveyance  of  the  land  to  the  defendant  Corey, 
and  as  this  action  was  not  commenced  until  more  than  six  years 
after  the  conveyance,  and  as  no  promise  to  pay  was  shown  to  have 
been  made  within  six  years,  the  statute  of  limitations  would  have 
been  a  complete  bar  to  an  action  at  law  to  recover  the  purchase 
price.    (2  R.  S.  295,  §  18.) 

This  action,  however,  was  one  of  equitable  cognizance.  At  the 
time  of  the  commencement  of  the  action,  the  relief  sought  to  be 
obtained  in  the  manner  applied  for,  that  is,  by  a  sale  of  the  prem- 
ises under  the  equitable  lien  thereon  for  the  purchase  price,  could 
have  been  awarded  by  a  court  of  equity  only. 

An  action  at  law,  if  commenced  at  any  time  within  six  years 
after  the  conveyance,  could  have  been  maintained  against  the  de- 
fendant Corey,  in  which  a  judgment  against  him  personally  would 
have  been  rendered.  The  object  of  such  an  action,  and  the  relief 
sought  for  therein,  would  have  been  the  recovery  of  the  unpaid 
purchase  price  of  the  land.  The  same  relief,  and  no  other  or  dif- 
ferent, is  sought  to  be  obtained  in  this  action,  and  a  court  of  equity 
was  resorted  to  solely  for  the  reason  that  courts  of  common  law 
jurisdiction  could  not  award  relief  otherwise  than  by  a  judgment 
against  the  defendant  personally.  The  same  facts  which  would 
constitute  a  defence  to  the  action  at  law  would  also  be  a  defence 
to  this  action,  unless  the  statute  of  limitations  be  an  exception. 

So,  too,  the  cause  of  action,  to  wit,  the  non-payment  of  the  pur- 
chase price  of  the  land,  is  the  same,  whichever  court  is  resorted  to. 

It  is  true  that,  to  sustain  the  suit  in  equity,  the  plaintiff  must 
bring  to  his  aid  the  equitable  lien  given  by  law,  while  the  action 
at  law  can  be  sustained  without  reference  to  such  lien.  But  the 
lien  is  merely  an  incident  to,  and  must  stand  or  fall  with  the  debt. 


626  DISCHARGE    OF   MORTGAGE 

The  debt  is  the  basis  or  foundation  of  the  lien.  The  latter  cannot 
exist  without,  or  independentl}^  of  the  former.  In  the  suit  to  en- 
force the  lien,  the  cause  of  action,  and  the  only  substantial  cause 
of  action,  is  the  debt. 

The  forty-ninth  section  of  the  title  of  the  Revised  Statutes  en- 
titled, "Of  the  time  of  commencing  actions"  (2  R.  S.  301),  pro- 
vides that  "whenever  there  is  a  concurrent  jurisdiction  in  the 
courts  of  common  law  and  in  courts  of  equity,  of  any  cause  of 
action,  the  provisions  of  this  title,  limiting  a  time  for  the  com- 
mencement of  a  suit  for  such  cause  of  action  in  a  court  of  common 
law,  shall  apply  to  all  suits  hereafter  to  be  brought  for  the  same 
cause  in  the  Court  of  Chancery." 

I  do  not  see  why  this  case  does  not  come  within  the  letter  of  the 
above  provision.  It  certainly  does,  if  I  am  right  in  supposing  that 
the  defendant's  indebtedness  for  the  purchase  price  of  the  land 
constitutes,  in  the  language  of  the  statute,  the  plaintiff's  "cause 
of  action." 

It  is  claimed  by  the  plaintiff's  counsel  that  if  the  language  of 
the  forty-ninth  section  is  sufficiently  broad  to  include  this  case, 
the  fiftieth  section  excepts  it  therefrom.  This  section  provides 
that  "the  last"  (§  49)  "section  shall  not  extend  to  suits  over  the 
subject-matter  of  which  a  court  of  equity  has  peculiar  and  exclu- 
sive jurisdiction,  and  which  subject-matter  is  not  cognizable  in  the 
courts  of  common  law." 

The  term  "subject-matter"  of  suits,  as  used  in  this  section,  is 
synonymous  with  the  term  "cause  of  action,"  contained  in  the 
preceding  forty-ninth  section.  No  other  definition  can  be  given  to 
the  phrase  as  applicable  to  this  case.  It  is  said  that  "the  subject- 
matter"  of  this  suit  is  the  equitable  lien,  of  which  a  court  of  law 
cannot  take  cognizance;  while,  if  a  suit  at  law  had  been  brought 
to  recover  the  purchase  price  of  the  land,  "the  subject-matter"  of 
the  action  would  have  been  the  debt.  But,  as  before  shown,  the 
lien  is  a  mere  incident  to  the  debt,  being  given  solely  to  secure  its 
payment.  If  the  lien  can  be  said  to  be,  in  any  sense,  the  "subject- 
matter"  of  this  action,  it  is  so  merely  as  incidental  to  the  debt, 
the  latter  being  the  principal  and  fundamental  "subject-matter" 
of  the  suit,  as  much  so  as  it  would  be  of  an  action  at  law  to  recover 
the  debt.  I  do  not  think  that  the  fiftieth  section  excepts  this  case 
from  the  operation  of  the  previous  section. 

Prior  to  the  Revised  Statutes  there  was  no  statute  in  this  state 
limiting  the  time  for  commencing  actions  in  courts  of  equity.  Yet, 
previously  to  the  adoption  of  those  Statutes,  it  was  frequently  held 


BORST  V.   COREY  627 

that,  in  cases  where  there  was  a  concurrent  jurisdiction  at  law 
and  in  equity,  time  was  as  absolute  a  defence  to  the  action  in 
equity  as  to  one  at  law;  not.  on  the  ground  of  expediency,  or  as  a 
matter  of  discretion  founded  on  analogy  to  the  statute  of  limita- 
tions, as  was  the  case  in  some  actions  of  purelj^  equitable  cog- 
nizance, but  in  obedience  to  the  statute.  {Rosevelt  v.  Mark,  6 
John.  Ch  R.  266;  Kane  v.  Bloodgood,  7  id.  90;  Murray  v.  Coster, 
20  John.  576;  Saunjer  v.  De  Meyer,  2  Paige,  574;  Humher  v.  Trinity 
Church,  7  id.  195;  24  Wend.  587;  Story's  Eq.,  §  529.) 

I  think  this  case  comes  within  the  principle  established  by  the 
above  authorities,  and  that,  independently  of  the  statutory  provi- 
sion limiting  the  time  of  commencing  actions  in  courts  of  equity, 
it  should  be  held  that  the  six  years'  limitation  to  actions  at  law 
constitutes  a  defence  to  this  action.  The  provision  of  the  Revised 
Statutes  limiting  the  time  of  commencing  actions  in  courts  of 
equity  was  adopted  as  declaratory  of  the  law  as  it  then  existed, 
and  not  as  introducing  a  new  rule.    (3  R.  S.  705,  revisers'  notes.) 

It  would  be  an  anomaly  if  the  plaintiff  could  recover  his  debt 
by  an  action  to  enforce  the  lien  given  to  secure  the  debt,  when  no 
action  could  be  sustained  to  recover  the  debt  directly  without 
reference  to  the  lien.  There  is  no  reason  why  the  limitation  should 
be  applicable  in  the  one  case  and  not  in  the  other. 

It  has,  however,  been  held  that  where  a  mortgage  was  given  to 
secure  the  payment  of  a  simple  contract  debt,  the  statute  limiting 
the  time  for  commencing  actions  for  the  recovery  of  such  debts 
was  no  bar  to  an  action  to  foreclose  the  mortgage.  {Balch  v. 
Onion,  4  Cush.  559;  Thayer  v.  Mann,  19  Pick.  535;  Elkin  v.  Ed- 
wards, 8  Geo.  325;  Heijer  v.  Pruyn,  7  Paige,  465.) 

But  there  is  a  material  distinction  between  a  mortgage  and  the 
equitable  lien  for  the  purchase  price  of  land  given  by  law,  and  also 
between  an  action  to  foreclose  a  mortgage  and  one  to  enforce  such 
a  hen.  The  action  to  foreclose  a  mortgage  is  brought  upon  an  in- 
strument under  seal,  which  acknowledges  the  existence  of  the  debt 
to  secure  which  the  mortgage  is  given;  and  by  reason  of  the  seal 
the  debt  is  not  presumed  to  have  been  paid  until  the  expiration  of 
twenty  years  after  it  becomes  due  and  payable.  The  six  years' 
limitation  has  no  application  to  a  mortgage.  In  fact,  all  instru- 
ments under  seal  are  expressly  excepted  therefrom.  No  action  at 
law  can  be  predicated  upon  the  mortgage,  to  collect  the  debt  se- 
cured thereby,  unless  there  is  contained  therein  a  covenant  to  pay 
the  debt.  A  debt  secured  by  deed  is  said  to  he  of  a  higher  nature 
than  one  by  simple  contract.    On  the  contrary,  the  equitable  lien 


628  DISCHARGE    OF   MORTGAGE 

is  neither  created  or  evidenced  by  deed,  but  arises  by  operation 
of  law,  and  is  of  no  higher  nature  than  the  debt  which  it  secures. 
It  must  coexist  with  the  debt  and  cannot  survive  it. 

It  is  true,  as  claimed  by  the  plaintiff's  counsel,  that  the  statute 
of  hmitations  does  not  extinguish  the  debt;  it  only  bars  the  remedy. 
But  the  remedy  by  action  at  law  is  no  less  barred  than  that  by 
suit  in  equity  to  enforce  the  lien.  The  Mayor,  &c.,  of  New  York  v. 
Colgate,  2  Kern.  140,  is  relied  upon  by  the  plaintiff  as  an  authority 
sustaining  his  position.  That  was  an  action  for  the  collection  of 
an  assessment  to  defray  the  expenses  of  improving  a  street  in  the 
city  of  New  York,  under  and  by  virtue  of  a  lien  upon  certain  lands 
in  the  city  deemed  to  be  benefited  by  the  improvement,  and  upon 
which  the  assessment  was  made.  The  action  was  not  commenced 
until  more  than  six  years  after  the  assessment  was  made,  and  had 
become  due  and  payable,  and  the  six  years'  limitation  was  set  up 
as  a  defence  to  the  action. 

The  statute  authorizing  the  assessment,  and  prescribing  the 
remedies  for  its  collection,  provided  that  the  sums  thus  assessed 
should  be  a  lien  or  charge  upon  the  houses  and  lots  in  respect  to 
which  the  assessment  was  made,  and  might  be  sued  for  and  re- 
covered with  costs,  in  like  manner  as  if  such  houses  and  lots  were 
mortgaged  to  the  corporation  for  the  payment  thereof.  The  assess- 
ment was  thus  made,,  in  effect,  a  mortgage  with  all  its  incidents, 
one  of  which  was  that  payment  was  not  to  be  presumed  until  the 
expiration  of  twenty  years;  and  it  was  upon  that  ground  that 
Judge  Denio  held  that  the  six  years'  limitation  did  not  apply,  while 
Chief  Judge  Gardiner  based  his  opinion  on  the  ground  that  the 
assessment  was  in  the  nature  of  a  judgment.  In  either  view,  the 
.case  is  distinguishable  from  the  one  under  consideration. 

I  think  the  judgment  should  be  affirmed. 

Denio,  C.  J.,  delivered  an  opinion  for  affirmance  upon  substan- 
tially the  same  grounds  as  those  stated  by  Bowen,  J. 

All  the  judges  except  Brown,  J.  (who  did  not  vote),  concurring 
in  this  opinion,^ 

Judgment  affirmed. 

1  Trotter  v.  Ervrin,   27   Miss.   772  Borst  v.  Corey  that  "the  reasoning 

(1854),  accord.    Lingan  v.  Henderson,  by  which  the  result  was  reached  in 

1    Bland.    Ch.    (Md.)    236    (1827),  that  case  is  not  altogether  satisfac- 

contra.    And  see  Hulbert  v.  Clark,  128  tory." 
N.  Y.  295,  300,  where  it  is  said  of 


LORD    V.    MORRIS  629 

LORD  V.  MORRIS 

Supreme  Court  of  California,  1861 

(18  Cal.  482) 

Plaintiff  appeals. 

Field,  C.  J.,  delivered  the  opinion  of  the  Court,  Baldwin,  J., 
and  Cope,  J.,  concurring. 

The  questions  presented  by  the  record  for  determination  are: 
first,  ^  whether,  when  an  action  upon  a  promissory  note,  secured  by 
a  mortgage  of  the  same  date  upon  real  property,  is  barred  by  the 
Statute  of  Limitations,  the  mortgagee  has  any  remedy  upon  the 
mortgage. 

The  Statute  of  Limitations  of  this  State  differs  essentially  from 
the  statute  of  James  I.,  and  from  the  statutes  of  limitation  in 
force  in  most  of  the  other  States.  Those  statutes  apply  in  their 
terms  only  to  particular  legal  remedies,  and  hence  Courts  of 
Equity  are  said  not  to  be  bound  by  them  except  in  cases  of  con- 
current jurisdiction.  In  other  cases  Courts  of  Equity  are  said  to 
act  merely  by  analogy  to  the  statutes,  and  not  in  obedience  to 
them.  Those  statutes  as  a  general  thing  also  apply,  so  far  as  ac- 
tions upon  written  contracts  not  of  record  are  concerned,  onh"^  to 
actions  upon  simple  contracts — that  is,  contracts  not  under  seal, 
fixing  the  limitation  at  six  years,  and  leaving  actions  upon  special- 
ties to  be  met  by  the  presumption  established  by  the  rule  of  the 
common  law,  that  after  a  lapse  of  twenty  years  the  claim  has  been 
satisfied.  In  those  statutes,  where  specialties  are  mentioned,  as 
in  the  statutes  of  Ohio  and  of  Georgia,  the  limitation  is  generally 
fixed  either  at  fifteen  or  twenty  years.  The  case  is  entirely  dif- 
ferent in  this  State.  Here  the  statute  applies  equally  to  actions 
at  law  and  to  suits  in  equity.  It  is  directed  to  the  subject-matter 
and  not  to  the  form  of  the  action,  or  the  forum  in  which  the  action 
is  prosecuted.  Nor  is  there  any  distinction  in  the  limitation  pro- 
scribed between  simple  contracts  in  writing  and  specialties.  Thus 
the  statute  requires  an  action  "upon  any  contract,  obligation,  or 
liability  founded  upon  an  instrument  of  writing,"  except  a  jud^;- 
ment  or  decree  of  a  Court  of  a  State  or  Territory,  or  of  the  Unit ;^  1 
States,  to  be  commenced  within  four  years  after  the  cause  of  ac- 
tion has  accrued.    It  matters  not  whether  damages  be  sought  for 

^  The  opinion  upon  the  first  point  only  is  given. 


630  DISCHARGE    OF   MORTGAGE 

a  breach  of  the  contract,  and  thus  an  action  at  law  be  brought, 
or  a  specific  performance  be  prayed,  and  thus  a  suit  in  equity  be 
commenced:  the  proceeding  must  in  either  case  be  taken  within 
the  limitation  designated.  (See  Pearis  v.  Covillaud,  6  Cal.  617.) 
The  statute,  after  prescribing  certain  periods  within  which  actions 
upon  judgments,  upon  simple  contracts,  for  relief  on  the  ground 
of  fraud,  and  for  other  causes,  shall  be  brought,  declares  in  general 
terms  that  "an  action  for  relief,"  not  thus  provided  for,  must  be 
conmienced  within  four  years  after  the  cause  of  action  shall  have 
accrued — covering  all  cases  where  equitable  or  other  relief  may  be 
sought. 

A  mortgage  in  this  State  also  differs  materially  from  a  mort- 
gage at  common  law,  or  a  mortgage  in  our  sister  States.  At 
common  law  a  mortgage  of  real  property  was  regarded  as  a  con- 
veyance of  a  conditional  estate,  which  became  absolute  upon  con- 
dition broken.  It  gave  to  the  mortgagee,  except  as  otherwise 
stipulated  by  provisions  inserted  in  the  instrument,  a  present  right 
of  possession.  Upon  it  the.  mortgagee  could  enter  peaceably,  or 
bring  ejectment,  or  a  writ  of  entry;  and  in  those  States  where  the 
common  law  view  has  been  modified  by  considerations  arising 
from  the  real  object  of  the  instrument  and  the  nature  of  the  trans- 
action, it  is  still  generally  held  that,  as  between  the  parties,  it 
passes  the  fee  and  gives  a  remedy  to  the  mortgagee  for  the  posses- 
sion, though  as  to  third  persons  it  constitutes  only  a  lien  or  charge, 
and  leaves  the  mortgagor  the  owner  of  the  premises.  Thus  in 
Ewer  V.  Hohbs,  5  Met.  3,  Chief  Justice  Shaw,  in  delivering  the 
opinion  of  the  Supreme  Court  of  Massachusetts,  after  stating  the 
object  of  a  mortgage  said:  "Hence  it  is  that,  as  between  mortgagor 
and  mortgagee,  the  mortgage  is  to  be  regarded  as  a  conveyance  in 
fee,  because  that  construction  best  secures  him  in  his  remedy,  and 
his  ultimate  right  to  the  estate,  and  to  its  incidents,  the  rents  and 
profits.  But  in  all  other  respects,  until  foreclosure,  when  the 
mortgagee  becomes  the  absolute  owner,  the  mortgage  is  deemed  to 
be  a  lien  or  charge,  subject  to  which  the  estate  may  be  conveyed, 
attached,  and  in  other  respects  dealt  with  as  the  estate  of  the 
mortgagor."  And  in  the  subsequent  case  of  Howard  v.  Robinson, 
5  Cush.  123,  the  same  distinguished  Justice  said:  "Although,  as 
between  mortgagor  and  mortgagee,  it  is  a  transmission  of  the  fee 
which  gives  the  mortgagee  a  remedy  in  the  form  of  a  real  action 
and  constitutes  a  legal  seizin,  yet  to  most  other  purposes  a  mort- 
gage before  the  entry  of  the  mortgagee  is  but  a  pledge  and  real 
lien,  leaving  the  mortgagor  for  most  purposes  the  owner."    The 


LORD    V.    MORRIS  631 

doctrine  with  respect  to  mortgages  is  very  different  in  this  State. 
Here  a  mortgage  is  regarded  as  between  the  parties,  as  well  as 
with  reference  to  the  rights  of  the  mortgagor  in  his  dealings  with 
third  persons,  as  a  mere  security,  creating  a  lien  or  charge  upon 
the  property,  and  not  as  a  conveyance  vesting  any  estate  in  the 
premises,  either  before  or  after  condition  broken.  Here  it  confers 
no  right  to  the  possession  of  the  premises  either  before  or  after 
default,  and,  of  course,  furnishes  no  support  to  an  action  of  eject- 
ment, or  to  a  writ  of  entry  for  their  recovery.  The  language  .of 
the  statute  is  express  that  it  shall  not  be  deemed  a  conveyance, 
whatever  its  terms,  so  as  to  enable  the  owner  of  the  mortgage  to 
recover  possession  without  a  foreclosure  and  sale.  (See  Pr.  Act, 
sec.  260;  McMillan  v.  Richards,  9  Cal.  411;  Nagle  v.  Macy,  id. 
428;  Johnson  v.  Sherman,  15  id.  293;  Goodenow  v.  Ewer,  16  id. 
464;  Boggs  v.  Hargrave,  16  id.  563;  Fogartij  v.  Sawyer,  17  id.  592.) 

From  this  statement  as  to  the  Statute  of  Limitations,  and  the 
operation  of  a  mortgage  upon  the  right  of  possession  in  this  State, 
it  is  evident  that  the  decisions  cited  from  the  reports  of  other 
States,  to  the  effect  that  a  mortgagee  has  a  remedy  upon  his  mort- 
gage after  the  Statute  of  Limitations  has  run  upon  the  promissory 
note  for  the  payment  of  which  the  mortgage  was  executed,  have  no 
application  to  the  questions  presented  for  consideration  in  the  case 
at  bar.  Those  decisions  are  founded  upon  distinctions  made  by 
the  statutes  of  limitations  of  those  States  which  do  not  exist  in  the 
statute  of  this  State,  or  upon  the  right  of  possesion  which  there 
accompanies  the  ownership  of  the  mortgage.  Thus  in  Elkins  v. 
Edwards,  8  Geo.  326,  which  was  a  suit  for  the  foreclosure  of  a  mort- 
gage, the  Supreme  Court  of  Georgia  said:  "Because  the  remedy 
on  the  note  is  barred  by  the  statute  in  six  years,  it  does  not  follow 
that  the  creditor's  remedy  on  the  mortgage,  being  a  sealed  instru- 
ment, is  also  barred.  The  creditor's  remedy  on  the  mortgage  is 
not  barred  until  twenty  years— the  debt  being  unpaid."  So  in 
Thayer  v.  Mann,  19  Pick.  535,  which  was  a  writ  of  entry  to  recover 
possession  of  the  mortgaged  premises,  the  Supreme  Court  of  Mas- 
sachusetts said:  "The  creditor  has  a  double  remedy,  one  upon  his 
deed  to  recover  the  land,  another  upon  the  note  to  recover  a  judg- 
ment and  execution  for  the  debt;  and  it  does  not  follow  that  he 
cannot  recover  on  one,  although  there  may  be  some  technical 
objection  or  difficulty  to  his  remedy  upon  the  other."  These  deci- 
sions are  no  authority  in  the  case  under  consideration,  for  the 
reasons  already  given,  that  the  statute  makes  no  distinction  in  the 
period  of  limitation  between  a  simple  contract  in  writing  and  a 


632  DISCHARGE    OF   MORTGAGE 

contract  under  seal,  and  a  mortgage  deed  here  does  not  confer  any 
right  of  possession  upon  the  mortgagee.  It  is  undoubtedly  true, 
as  stated  by  the  Court  in  the  case  from  Georgia,  that  the  creditor 
stipulated  by  contract  for  two  remedies  against  his  debtor  to  en- 
force the  collection  of  his  demand — the  one  by  action  upon  the 
r.ote,  and  the  other  by  petition  and  foreclosure  upon  the  mortgage. 
Similar  remedies  he  can  pursue  in  this  State.  He  can  proceed  upon 
the  note,  and  take  an  ordinary  money  judgment  for  the  amount 
due;  or  he  can  sue  in  equity  upon  the  mortgage,  and  take  a  decree 
for  its  foreclosure  and  the  sale  of  the  premises.  The  difference  is, 
that  here  the  limitation  prescribed  to  the  equitable  suit  is  the 
same  as  that  prescribed  to  the  action  at  law.  The  mortgage  is  as 
much  within  the  general  designation  of  a  "contract,  obligation,  or 
liability,  founded  upon  an  instrument  of  writing,"  as  is  the  note 
itself. 

We  do  not  question  the  correctness  of  the  general  doctrine  pre- 
vailing in  the  courts  of  several  of  the  States,  that  a  mortgage  re- 
mains in  force  until  the  debt  for  the  security  of  which  it  is  given 
is  paid.  We  only  hold  that  the  doctrine  has  no  application  under 
the  Statute  of  Limitations  of  this  State.  A  mortgage  is  a  specialty, 
and  is  not  within  the  terms  of  the  English  statute,  or  of  the  stat- 
utes of  most  of  the  States.  An  action  founded  upon  such  specialty 
can  only  be  met  by  proof  of  payment.  The  payment  may  be  es- 
tablished by  direct  evidence  of  the  fact,  and  it  may  be  presumed 
from  the  lapse  of  twenty  years,  when  such  presumption  is  not 
countervailed  Ijy  evidence  from  the  mortgagee.  "Thus,"  says  the 
Supreme  Court  of  Maine  in  Joy  v.  Adams,  26  Maine,  333,  "a  mort- 
gage security  has  not  been  deemed  to  be  within  any  branch  of  the 
Statute  of  Limitations.  He  who  would  avoid  such  security  must 
show  payment;  otherwise,  the  mortgagee  will  not  be  precluded 
from  entering  upon  and  holding  possession  of  the  mortgaged 
]iremises.  The  mortgagor  has  not  been  allowed  to  defeat  such 
right  by  showing  merely  that  the  personal  security,  to  which  the 
mortgage  security  is  collateral,  has  become  barred  {Thayer  v. 
Mann,  19  Pick.  535);  but  he  has  been  allowed  to  allege  payment, 
and  for  proof  to  rely  upon  the  lapse  of  time,  when  it  amounted  to 
twenty  years  from  the  accruing  of  the  indebtment.  Such  a  lapse 
of  time  has  been  deemed  to  be  sufficient  for  the  purpose,  in  the 
absence  of  any  countervailing  considerations.  This  is  admitted 
as  a  presumption  of  law,  which  may  be  removed  by  circumstances 
tending  to  produce  a  contrary  presumption."  The  view  thus 
stated  is  met  by  our  statute,  which  embraces  a  mortgage  security 


HARRIS   V.   MILLS  633 

within  its  terms.    Here  payment  may  be  pleaded,  and  so  may  the 
statute  itself  without  reference  to  the  fact  of  payment. 

Our  conclusion,  therefore,  upon  the  first  question  presented  is, 
that  where  an  action  upon  a  promissory  note,  secured  by  a  mort- 
gage of  the  same  date  upon  real  property,  is  barred  by  the  statute, 
the  mortgagee  has  no  remedy  upon  the  mortgage;  that  though 
distinct  remedies  may  be  pursued  by  him,  the  limitation  prescribed 
is  the  same  to  both. 

Judgment  affirmed} 

HARRIS   V.   MILLS 

Supreme  Court  of  Illinois,  1862 

(28  ///.  44) 

Walker,  J.  This  bill  was  exhibited  to  foreclose  a  mortgage, 
given  to  secure  a  note  alleged  to  have  been  lost.  The  mortgage 
bears  date  the  12th  of  May,  1837,  and  recites  a  note  for  seven  hun- 
dred dollars.  The  note  is  alleged  to  have  been  given  on  the  9th  of 
April,  1836,  by  Edwin  Mills  to  appellant,  due  on  the  9th  day  of 
September,  1838.  The  mortgage  was  not  recorded  until  the  8th 
day  of  November,  1855,  and  appears  never  to  have  been  acknowl- 
edged. It  also  appears  that  Edwin  Mills,  on  the  13th  day  of  Jan- 
uary, 1839,  executed  a  mortgage  on  the  same  land  to  secure  two 
thousand  dollars  to  Harlow  Mills,  for  indebtedness  due  to  him. 
This  latter  mortgage  was  acknowledged  and  recorded.  Edwin 
Mills,  on  the  17th  day  of  February,  1842,  conveyed  the  m£)rtgaged 
premises  to  Harlow  Mills  for  the  expressed  consideration  of  two 
thousand  dollars.  This  deed  was  recorded  on  the  4th  of  August, 
1842,  in  the  proper  office. 

The  bill  charges  that  this  deed  and  mortgage,  from  Edwin  to  Har- 
low Mills,  are  without  consideration,  and  are  fraudulent  and  void. 
It  is  also  charged  that  they  were  taken  by  Harlow  with  full  notice 
of  appellant's  prior  mortgage.  The  answer  alleges  that  a  consider- 
ation was  given,  and  denies  all  notice  of  the  prior  mortgage.  The 
answer  also  sets  up,  and  relies  upon,  the  lapse  of  more  than  sixteen 
years  after  the  maturity  of  the  note  and  before  the  exhibition  of  the 
bill,  as  a  bar  to  a  foreclosure.  On  the  hearing,  the  court  below  dis- 
missed the  bill  and  rendered  a  decree  against  complainant  for  costs, 
to  reverse  which  he  prosecutes  this  appeal. 

'  But  that  the  mortgagor  is  not  De  Cazara  v.  Orena,  80  Cal.  132 
entitled    to    affirmative     rehef,     see       (1889). 


634  DISCHARGE    OF   MORTGAGE 

The  principal  question  presented  by  this  record  is  this:  the  stat- 
ute of  Umitations  having  barred  a  recovery  by  suit  on  the  note, 
does  it  form  a  bar  to  a  foreclosure  of  the  mortgage  by  bill  in  equity? 
Had  this  been  an  action  on  the  note,  over  sixteen  years  having 
elapsed  after  the  maturity  of  the  note,  the  recovery  would  have 
been  barred.  If  such  an  action  had  been  instituted,  and  a  recovery 
defeated,  the  judgment  could  have  been  interposed  as  a  successful 
bar  to  a  foreclosure.  Or,  had  an  ejectment  been  brought,  and  the 
bar  of  the  statute  allowed  to  defeat  a  recovery  against  Harlow 
Mills  or  those  holding  under  him,  the  judgment  might  also  have 
been  relied  upon  to  prevent  a  decree  of  foreclosure.  Or,  had  a 
scire  facias  been  sued,  and  had  the  statute  of  limitations  been  suc- 
cessfully interposed  to  defeat  a  recovery,  the  judgment  might  have 
been  pleaded  to  avoid  a  foreclosure  by  bill.  When  the  party  has 
elected  one  of  several  remedies,  and  it  results  in  a  judgment  against 
the  mortgagee,  that  judgment  becomes  as  complete  a  bar  to  a  pro- 
ceeding in  a  different  form  for  a  foreclosure  as  payment,  release, 
or  other  discharge. 

The  question,  however,  still  recurs,  whether,  after  several  reme- 
dies have  been  barred,  but  not  established  in  a  legal  proceeding,  the 
bar  may  be  relied  upon  in  other  and  different  remedies?  As  a 
general  rule,  courts  of  equity  follow  the  law  in  allowing  the  de- 
fense of  the  statute  of  limitations.  A  bar^  of  the  statute,  at  law, 
forms  a  bar  in  equity.  (Story's  Eq.  PL,  §  500,  §  751.)  In  equity, 
as  at  law,  an  acknowledgment  that  a  debt  is  due,  and  a  promise 
to  pay  it,  will  take  it  out  of  the  operation  of  the  statute.  If  the 
mortgago*-  is  permitted  to  remain  in  possession  twenty  years  after 
a  breach 'of  the  condition,  the  right  to  file  a  bill  to  foreclose  will  be 
generally  considered  as  barred  and  extinguished.  Though  in  cases 
of  this  description,  as  the  law  is  not  positive,  but  is  based  upon  pre- 
sumption of  payment,  it  is  open  to  be  rebutted  by  circumstances. 
(2  Story's  Eq.,  §  1028,  b.)  This  court  has  repeatedly  held,  in 
conformity  to  the  general  doctrine  announced  by  the  adjudged 
cases,  that  the  debt  is  the  principal  thing  and  the  mortgage  is  the 
incident.  That  the  latter  follows  the  consideration  of  the  former. 
That  an  assignment  of  the  note  operates  ipso  facto  to  transfer  the 
mortgage.  That  a  payment,  release  or  other  discharge  of  a  note 
satisfies  and  releases  the  mortgage.  If  we  are  to  be  controlled  by 
analogy,  no  reason  can  be  perceived  why  a  bar  to  a  recovery  on  the 
note  should  not  produce  the  same  effect  on  the  mortgage. 

In  Great  Britain  it  is  usual  to  insert  in  the  mortgage  itself  a  cov- 
enant for  the  payment  of  the  money.    When  such  a  covenant  is 


HARRIS    V.    MILLS  635 

found  in  the  mortgage,  it  being  under  seal,  and  the  debt  to  secure 
which  it  was  given  is  not,  a  bar  to  a  recovery  of  the  debt,  if  of  a 
shorter  period  than  a  bar  to  a  sealed  instrument,  could  not  affect 
the  remedy  on  the  covenant  in  the  mortgage.  If  the  statutory 
period  necessary  to  bar  an  unsealed  instrument  be  of  shorter  dura- 
tion than  a  sealed  instrument,  a  mortgage  containing  such  a  cov- 
enant given  to  secure  the  payment  of  a  debt  evidenced  by  an  un- 
sealed note  would  be  governed  by  the  longer  period  required  to  bar 
a  recovery  on  sealed  instruments.  The  mortgage  in  this  case  con- 
tains no  such  covenant.  This  being  so,  renders  the  decisions  of 
the  British  courts  on  mortgages  containing  such  covenants,  and 
given  to  secure  simple  contracts,  inapplicable  to  this  case.  The 
statute  having  barred  a  recovery  on  the  note,  because  according 
to  the  theory  upon  which  the  statute  is  based,  the  presumption  is 
that  the  debt  has  been  paid.  There  is  no  evidence  in  this  record 
shoeing  any  promise  to  take  it  out  of  the  operation  of  the  statute. 
These  statutes  are,  emphatically,  statutes  of  repose.  Without 
their  aid  litigation  would  never  be  barred,  and  titles  and  possession 
of  property  would  never  be  quieted.  By  the  efflux  of  time,  the 
loss  of  evidence,  the  death  of  witnesses,  and  the  failure  of  memory, 
were  it  not  for  the  bar  of  these  statutes,  great  injustice  would  result. 
These  considerations  have  induced  all  civilized  nations  to  adopt 
such  laws,  differing  in  detail  and  in  the  period  necessary  to  operate 
as  a  bar,  but  all  based  upon  the  same  principles  and  to  attain  the 
same  object.  Nor  need  such  enactments  work  injustice.  Persons 
under  disability  have  allowed  to  them  ample  opportunity,  after  the 
disability  ceases  to  e.xist,  for  the  assertion  of  their  rights,  and  those 
not  under  disability  have  also  ample  opportunity,  within  the  period 
of  limitation,  to  assert  theirs.  To  avoid  loss  the  creditor  has  only 
to  use  reasonable  diligence,  to  avoid  the  bar  of  the  statute. 

It  has  been  said  that  no  length  of  time  will  bar  a  foreclosure  by 
a  mortgagee  out  of  possession.  This  is  placed  upon  the  ground  that 
the  relation  of  landlord  and  tenant  is  supposed  to  exist  between 
the  parties.  But  such  is  not  the  true  relation  of  the  parties.  For 
some  purposes,  and  to  a  limited  extent  only,  a  portion  of  the  inci- 
dents are  the  same.  To  a  limited  extent,  and  for  some  purposes, 
the  relation  of  vendor  and  vendee,  and  trustee  and  cestui  que  trust, 
also  exists.  The  relation  which  the  parties  bear  to  each  other  is 
peculiar  to  itself,  partaking  in  some  degree  of  the  incidents  of  these 
other  relations,  but  analogous  in  all  particulars  to  no  one  of  them. 
Whilst  a  tenant,  until  he  surrenders  the  possession  to  the  landlord, 
■cannot  rely  upon  the  statute,  yet  the  mortgagor,  bj^  acquiring  an 


636  DISCHARGE    OF   MORTGAGE 

outstanding  title  and  occupying  the  premises  under  it  for  the 
l^eriod,  and  upon  the  conditions  imposed  by  the  statute,  may  in- 
voke its  aid  to  prevent  a  foreclosure.  Nor  is  he,  like  a  tenant,  re- 
quired to  account  for  rents  and  profits,  bound  to  repair,  nor  is  he 
impeachable  for  waste.  Other  courts  have  held,  and  such  is  clearly 
the  weight  of  authority,  that  when  the  statutory  period  necessarv 
to  bar  a  recovery  at  law  has  elapsed,  it  will  bar  a  foreclosure. 
{Christophers  v.  Sparke,  2  Jacob  and  W.  234;  Jackson  v.  Wood,  12 
J.  R.  242;  Giles  v.  Barremore,  5  J.  R.  545;  Waterman  v.  Haskins, 
ibid.  283;  Jackson  v.  Myers,  3  J.  R.  383;  Baker  v.  Evans,  2  Car.  S.  R. 
614;  Hugh  v.  Edwards,  9  Wheat.  497;  Moore  v.  Cable,  1  J.  Ch.  R. 
385.)  We  are,  therefore,  for  these  reasons,  of  the  opinion  that  when 
the  note  became  barred  by  the  statute  the  right  to  foreclose  also 
became  barred,  unless  the  mortgage  had  contained  a  covenant  for 
the  payment  of  the  money,  when  it  might  be  that  it  would  require 
twenty  years  to  produce  that  effect,  as  an  ejectment  would  not  be 
barred,  under  the  general  limitation  law,  before  that  period,  unless 
it  be  under  the  seven  year  limitation  acts.  No  error  is  perceived  in 
dismissing  complainant's  bill,  and  the  decree  of  the  court  below 
must  be  affirmed.^ 

Decree  affirmed. 

1  Pollock   V.   Maison,   41    III.   516  L.  (1894),  §  5094;  Miss.  Ann.  Code 

asm);  Newman  V.  DeLorimer,  19  la..  (1892),     §2733;    Mo.    Rev.     Stats. 

244  (1865);  Schmucker  v.  Sibert,   18  (1899),     §4276,     accord.       Compare 

Kans.    104    (1877);    Lilly   v.    Dunn,  Von  Campe  v.  City  of  Chicago,  140 

96  Ind.  220  (1884);  Ark.  Dig.  Stat.  111.  361  (1892). 


CHAPTER  VI 
PRIORITIES 

FULLERTON  v.  PROVINCIAL  BANK  OF  IRELAND 
House  of  Lords,  1903 
(L.  R.  [1903]  A.  C.  309) 

This  Appeal  turned  on  the  construction  of  letters. 

In  the  spring  of  1895  Colonel  Stevenson  having  overdrawn  his 
account  with  the  Provincial  Bank  of  Ireland  was  asked  by  the  bank 
to  reduce  the  debt.  He  wrote  several  letters  to  the  manager  in 
which  he  said  that  he  was  buying  an  estate  and  when  he  received 
the  conveyance  he  would  deposit  the  deed  as  a  security  for  the  over- 
draft. In  July,  1895,  he  deposited  the  conveyance  with  the  bank. 
In  July,  1896,  he  executed  a  mortgage  of  the  estate  in  favour  of  the 
appellants.  This  mortgage  was  registered  in  the  Dublin  Registry 
of  Deeds  by  the  appellants  without  notice  of  the  prior  charge. 
Colonel  Stevenson  afterwards  sold  the  estate  under  the  Irish  Land 
Purchase  Acts,  and  it  became  necessary  to  decide  the  priorities  of 
the  above  two  incumbrances. 

Meredith,  J.,  held  that  upon  the  true  construction  of  the  letters 
they  contained  an  undertaking  to  deposit  the  conveyance,  and 
therefore  amounted  to  an  equitable  charge  of  the  estate  in  favour 
of  the  bank,  and  that  as  the  charge  had  not  been  registered  as 
required  by  6  Anne  (Ir.),  c.  2,  the  mortgage  held  by  the  appellants 
which  was  registered  had  priority  over  the  claim  of  the  bank.  The 
Irish  Court  of  Appeal  (FitzGibbon  and  Holmes,  L.  JJ.,  Walker, 
L.  J.,  dissenting)  reversed  that  decision,  holding  that  the  letters 
did  not  amount  to  an  undertaking  to  deposit  the  conveyance,  that 
registration  was  therefore  not  necessary,  and  that  the  bank  was 
entitled  to  priority  over  the  appellants,  on  the  principle  laid  down 
in  In  re  Burke,  (1881),  9  L.  R.  Ir.  24.  From  this  decision  the 
present  appeal  was  brought. 

Wylie,  K.  C,  and  Henry,  K.  C.  (R.  E.  Osborne  with  them — 
Irish  Bar),  for  the  appellants,  contended  that  the  construction  put 

637 


638  PRIORITIES 

by  Meredith,  J.,  on  the  letters  was  the  true  one  and  that  the  decision 
of  that  learned  judge  was  right. 

Campbell,  S.  G.  (Ir.),  and  Gordon,  K.  C.  {Garrett  Walker  with 
them — Irish  Bar),  for  the  respondents,  contended  that  the  decision 
of  the  Court  of  Appeal  was  right  on  two  grounds :  first  because  there 
was  no  undertaking  to  deposit  the  conveyance,  only  a  hope  that 
the  writer  might  be  able  to  make  the  deposit;  and  secondly  because 
even  if  the  letters  did  amount  to  an  undertaking,  there  was  no  con- 
sideration for  it,  no  forbearance  or  giving  of  time  on  the  part  of  the 
bank;  and  relied  on  the  decision  of  In  re  Burke,  (1881),  9  L.  R.  Ir. 
24,  where  it  was  held  that  the  bare  deposit  of  title-deeds  unac- 
companied by  any  writing  did  not  require  registration  under  6 
Anne  (Ir.),  c.  2,  and  that  the  deposit  took  priority  over  a  subse- 
quent deed  registered  without  notice  of  the  deposit. 

Lord  Macnaghten.^  My  Lords,  the  point  raised  by  this  ap- 
peal is  a  short  point,  and  not,  I  think,  one  of  any  great  difficulty. 

The  appellants  and  the  respondents  were  both  equitable  incum- 
brancers on  certain  property  in  Westmeath  known  as  the  Portle- 
mon  estate,  and  there  is  a  contest  for  priority  between  them.  The 
Portlemon  estate  has  now  been  sold.  But  at  the  commencement 
of  the  contest  the  equity  of  redemption  was  vested  in  a  Colonel 
Stevenson,  who  acquired  the  property  from  a  Mrs.  Treacy;  she 
conveyed  it  to  him  in  consideration  of  the  sum  of  8000/. ,  which  was 
secured  on  the  property  by  a  legal  mortgage  of  even  date  with  the 
conveyance. 

The  charge  in  favour  of  the  appellants  (who  are  the  trustees  of 
Colonel  Stevenson's  marriage  settlement)  was  created  by  a  deed  of 
mortgage  dated  the  29th  and  duly  registered  on  the  31st  of  July, 
1896.  There  is  no  question  as  to  the  validity  or  the  regularity  of 
this  mortgage. 

The  charge  in  favour  of  the  respondents  was  created  or  com- 
pleted by  the  deposit  on  July  15,  1895,  of  the  conveyance  to 
Colonel  Stevenson  of  the  Portlemon  estate.  Their  incumbrance 
is,  therefore,  prior  in  date  to  that  of  the  appellants. 

The  respondents'  case  is  that  they  have  not  and  never  had  any 
charge  upon  the  property  in  question  except  the  charge  that  was 
created  by  the  deposit  of  Colonel  Stevenson's  conveyance;  that 
they  had,  therefore,  nothing  to  register;  that  the  statute  of  Anne 

'  Portions  of  the  opinions  of  Lords       of    Lords    Shand,     Robertson    and 
Macnaghten  and  Davey  have  been       Lindley  have  been  omitted, 
omitted.      The   concurring   opinions 


FrLLERTON    V.    PROVINCIAL   BANK    OF    IRELAND  639 

has  no  application  to  their  security,  and  that  according  to  the  law 
laid  down  in  In  re  Burke,  9  L.  R.  Ir.  24,  they  are  entitled  to  the 
priority  which  properly  belongs  to  priority  of  date. 

The  case  of  the  appellants  is  that  the  deposit  on  which  the  re- 
spondents rely  was  accompanied  or  preceded  by  certain  letters 
leading  up  to  the  actual  deposit  which  were  sufficient  to  create, 
and  which  did  in  fact  create,  a  valid  equitable  charge  on  Colonel 
Stevenson's  interest  in  the  Portlemon  estate;  that  these  letters, 
therefore,  or  some  or  one  of  them  ought  to  have  been  registered, 
and  that  for  want  of  such  registration  the  claim  put  forward  on 
behalf  of  the  respondents  fails,  and  their  alleged  security  must  be 
held  to  be  fraudulent  and  void  against  holders  of  a  subsequent 
registered  mortgage. 

The  whole  question,  therefore,  depends  on  the  meaning  and 
effect  of  these  letters.  They  were  written  by  Colonel  Stevenson 
to  the  local  manager  of  the  Provincial  Bank  at  Londonderry, 
where  Colonel  Stevenson's  account  was  kept. 

The  earliest  in  date  is  one  of  March  26th,  1895.  The  others 
are  dated  May  18,  May  24,  and  June  7.  When  those  letters  were 
written  the  conveyance  of  the  Portlemon  estate  to  Colonel  Steven- 
son was  not  in  existence — the  arrangement  for  the  sale  of  the 
property  to  him  was  only  in  progress.  The  conveyance  was  not 
executed  until  July  11,  1895. 

Throughout  the  letters,  and  more  particularly  in  the  letter  of 
May  18,  Colonel  Stevenson  is  making  out  a  case  for  indulgence 
and  pleading  for  forbearance.  Apparently  the  local  manager  had 
given  him  to  understand  that  he  himself  was  likely  to  get  into 
trouble  with  the  head  office  over  the  account,  and  on  May  18 
Colonel  Stevenson  writes:  "All  you  require  is  a  little  patience, 
and  my  account  will  be  put  upon  a  satisfactory  basis."  That  was 
the  tone  of  the  letters  throughout.  In  addition,  it  is  enough  for 
me  to  remind  your  Lordships  that  at  the  outset  of  the  corre- 
spondence on  March  26,  1895,  Colonel  Stevenson  writes:  "When  I 
receive  the  title-deeds  of  the  Portlemon  property  from  my  solici- 
tors I  will  have  same  at  once  lodged  with  you."  That  was  a  clear 
and  definite  statement  on  which  the  manager  of  the  bank  was 
apparently  intended  to  rely.  From  that  statement  Colonel  Steven- 
son never  receded.  He  never  qualified  it.  On  the  contrary,  he 
repeated  it  more  than  once,  and  in  one  letter  he  refers  to  it  as  a 
thing  which  he  had  "undertaken." 

My  Lords,  if  these  letters  were  serious  letters  meant  to  be  taken 
seriously,  I  cannot  doubt  that  they  created  a  vahd  charge  in 


640  PRIORITIES 

equity  attaching  to  Colonel  Stevenson's  interest  in  the  Portlemon 
estate  the  very  moment  the  property  was  conveyed  to  him,  and 
carrying  over  his  interest  b}'^  way  of  security  to  the  bank. 

I  therefore  move  your  Lordships  that  the  appeal  be  allowed, 
and  the  judgment  of  Meredith,  J.,  restored  with  costs  both  here 
and  below. 

Lord  Davey.  My  Lords,  it  might  appear  to  some  people  that 
the  policy  of  the  Irish  Registration  Act  was  to  postpone  an  un- 
registered transfer  of  property  to  a  registered  one,  whether  the 
non-registration  arose  from  negligence  or  inadvertence  or  from 
the  fact  of  the  transfer  having  been  effected  without  any  docu- 
ment being  executed  which  was  capable  of  being  registered.  I 
must  express  my  personal  regret  that  it  was  not  so  held,  but  it  is 
too  late  now  for  your  Lordships  to  interfere  with  what  has  become 
the  settled  law  and  is  expressed  in  In  re  Burke,  9  L.  R.  Ir.  24. 

I  am  of  opinion  that  the  letters,  reading  them  together,  consti- 
tuted a  contract  to  create  an  equitable  mortgage  on  the  Portlemon 
estate  as  soon  as  the  conveyance  to  Colonel  Stevenson  was  com- 
pleted. On  that  event  taking  place,  the  contract  became  absolute 
and  bound  the  property  in  his  hands.  The  letters,  therefore, 
constituted  a  transfer  to  the  bank  of  the  equitable  interest  in  the 
property,  and  constituted  a  conveyance  within  the  meaning  of 
the  Registration  Act.  It  ought,  therefore,  to  have  been  registered 
in  order  to  secure  the  priority  of  the  bank;  and  not  having  been 
registered,  I  think  the  appellants  who  claim  under  a  subsequent 
instrument  which  was  registered  are  entitled  to  claim  priority 
over  the  bank  in  respect  of  their  advance. 

Order  of  the  Court  of  Ay-peal  reversed;  judgment  of  Meredith,  J., 
restored  with  costs  here  and  below. 


SPRING  V.  SHORT 

Court  of  Appeals  of  New  York,  1882 

(90  N.  Y.  538) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court,  in  the  fourth  judicial  department,  entered  upon  an  order 
made  the  second  Monday  of  June,  1881,  which  affirmed  a  judg- 
ment in  favor  of  plaintiff,  entered  upon  a  decision  of  the  court  on 
trial  at  Special  Term. 

This  action  was  brought  to  foreclose  a  mortgage  executed  by 


SPRING    V.    SHORT  641 

the  defendant,  George  M.  Spring,  to  the  plaintiff,  who  is  the 
father  of  the  mortgagor. 

The  appellants  are  judgment  creditors  of  the  mortgagor.  The 
defense  set  up  by  them,  is,  that  the  mortgage  was  executed  with- 
out consideration,  with  intent  to  defraud  creditors.  The  mort- 
gage, although  dated  11th  of  April,  1872,  was  not  executed  until 
the  5th  of  October,  1876.  It  was  recorded  on  the  day  of  its  execu- 
tion. The  premises  covered  by  the  mortgage  had  been  conveyed 
by  the  plaintiff  to  his  said  son  on  the  day  on  which  the  mortgage 
bears  date,  and  the  Special  Term  found  that  the  consideration 
of  the  mortgage  was  the  purchase-price  of  said  premises ;  that  the 
mortgage  and  the  bond  to  which  it  was  collateral  were  executed 
pursuant  to  an  agreement  made  at  the  date  of  said  conveyance 
that  the  same  should  be  executed  to  secure  the  said  purchase- 
price.  Upon  those  facts  the  Special  Term  held  that  the  bond  and 
mortgage  were  valid  as  against  the  mortgagor  and  his  judgment 
creditors,  the  appellants. 

The  judgments  of  the  appellants  were  all  recovered  subsequent 
to  the  execution  and  recording  of  the  mortgage,  btit  upon  debts 
which  accrued  prior  thereto,  the  credits  were  given  under  the 
supposition  that  the  title  of  the  debtor  was  unincumbered. 

Miller,  J.^  Upon  the  trial  the  court  found  that  the  considera- 
tion of  the  bond  and  mortgage,  which  are  the  subject  of  this  ac- 
tion, was  the  purchase-price  of  the  mortgaged  premises  which 
were  conveyed  by  the  plaintiff  to  his  son  George  M.  Spring,  by 
deed  dated  April  11,  1872,  and  that  the  same  were  made  and 
executed  in  pursuance  of  an  agreement  made  at  the  date  of  said 
•deed  that  the  same  should  be  executed  and  delivered  to  secure 
the  purchase-price  of  said  real  estate,  and  held  that  the  mortgage 
was  a  valid  lien  upon  the  premises  against  the  mortgagor  and  the 
appellants  in  this  action.  There  was  evidence  on  the  trial  to  sus- 
tain this  finding,  although  there  are  circumstances  and  facts 
which  tend  to  show  that  such  was  not  the  consideration  of  the 
mortgage.  It  is  proved  that  there  was  no  such  agreement  in 
writing;  that  this  understanding  was  not  communicated  by  the 
plaintiff  to  any  person  outside  of  his  own  immediate  family;  that 
the  mortgagor  had  occupied  the  premises  for  a  number  of  years 
prior  to  the  execution  of  the  deed;  that  he  continued  to  occupy 
them  and  use  them  as  his  own  until  after  the  mortgage  had  been 
-executed,  with  the  consent  and  approval  of  the  plaintiff;  and  that 

^  Portion  of  opinion  dealing  with  another  point  omitted. 


G42  '  PRIORITIES 

the  appellants  had  no  notice  or  knowledge  of  the  agreement  or  of 
plaintiff's  claim,  and  that  they  trusted  the  mortgagor  under  a 
belief  that  the  premises  were  owned  by  him  and  were  free  from 
incumbrance.  It  also  appears  that  when  the  mortgage  was  exe- 
cuted to  the  plaintiff  he  had  knowledge  of  the  fact  that  his  son 
was  embarrassed  and  that  he  took  the  mortgage  with  a  view  of 
having  it  recorded  before  the  judgments  of  the  appellants  should 
be  docketed  against  his  son,  and  become  liens  on  the  land.  There 
was  also  evidence  of  declarations  made  by  the  plaintiff  to  different 
persons  to  the  effect  that  he  had  made  a  gift  of  the  premises  to 
his  son  and  that  his  son  was  responsible,  but  this  testimony  was 
contradicted  by  the  plaintiff. 

The  testimony  to  which  we  have  referred  as  well  as  the  circum- 
stances surrounding  the  case  present  a  question  of  fact  as  to 
whether  the  mortgage  was  executed  in  good  faith  for  a  valid  con- 
sideration or  was  fraudulent.  This  it  was  the  province  of  the 
court  upon  the  trial  to  decide,  and  the  court  having  found  that 
the  consideration  was  a  valid  one  and  in  fact  that  the  bond  and 
mortgage  were  made  to  secure  a  lawful  demand  as  hereinbefore 
stated,  it  cannot,  we  think,  be  fairly  claimed  that  it  was  fraudulent 
and  void  by  reason  of  a  failure  of  consideration.  It  is  insisted, 
however,  by  the  counsel  for  the  appellants  that  even  although 
the  court  has  found  an  agreement  which  would  uphold  the  mort- 
gage, as  between  the  parties  to  the  same,  yet  the  court  should 
not  have  sanctioned  the  right  of  the  vendor  to  hold  for  an  unlimited 
length  of  time  a  secret  lien  and  allow  the  plaintiff  to  set  it  up  to 
the  exclusion  of  bona  fide  creditors.  The  question  as  to  the  extent 
to  which  a  secret,  equitable  and  unrecorded  lien  of  a  vendor,  for 
unpaid  purchase-money  of  lands  sold  and  conveyed  by  him,  exists 
as  against  a  judgment  creditor  after  the  lien  is  recorded,  or  other 
parties  than  the  vendee,  must  depend  upon  the  facts  and  circum- 
stances of  the  particular  case.  Such  lien  cannot  exist  generally 
against  purchasers  in  good  faith,  under  a  conveyance  of  the  legal 
estate,  without  notice,  when  the  purchase-money  has  been  said. 
(See  Fisk  v.  Potter,  2  Keyes,  64.) 

The  general  rule  stated  applies  more  particularly  to  cases  where 
it  is  sought  to  enforce  an  equitable  lien  for  the  purchase-money, 
which  has  never  been  put  on  record  as  against  subsequent  mort- 
gagees or  purchasers  in  good  faith  and  for  a  valuable  consideration. 
In  such  a  case  it  is  too  clear  to  admit  of  any  question  that  the 
rights  of  the  person  claiming  such  equitable  lien  should  yield,  by 
reason  of  his  neglect,  to  the  claims  of  subsequent  incumbrancers 


SPRING    V.    SHORT  643 

or  purchasers,  and  it^ay  well  be  asserted  that  a  prior  claimant 
for  the  purchase-money  under  such  circumstances  has,  by  his 
silence  or  neglect,  yielded  his  right.  In  the  case  at  bar  the  appel- 
lants' judgments  were  not  recorded  prior  to  the  making,  execu- 
tion and  recording  of  the  plaintiff's  mortgage,  and  they,  therefore, 
occupied  entirely  a  different  position.  A  distinction  also  exists 
as  to  a  judgment  creditor  who  advances  his  money  upon  the  faith 
of  an  unincumbered  title  upon  the  record,  without  notice,  who  is 
entitled  to  the  lien  acquired  thereby  in  preference  to  the  secret 
unrecorded  lien  of  a  vendor  for  part  of  the  purchase-money,  and 
he  is  to  be  regarded  as  a  quasi  purchaser  for  a  valuable  considera- 
tion without  notice.  (See  Hulett  v.  Whipple,  58  Barb.  224.)  The 
appellants  are  clearl}^  not  within  this  rule.  In  the  first  place  their 
judgments  are  on  record  subsequent  to  the  record  of  the  mortgage 
of  the  plaintiff,  and  besides  they  are  not  in  the  position  of  judg- 
ment creditors  who  have  advanced  money  without  notice  on  the 
faith  of  a  good  title;  they  are  merely  ordinary  creditors  who  have 
contracted  a  debt  with  another,  supposing  that  he  was  the  owner 
of  property  unincumbered  and  had  ability  to  pay.  That  they  were 
mistaken  in  this  respect  does  not  entitle  them  to  the  rights  of  a 
party  who  advances  money,  within  the  rule  stated.  In  relying 
upon  the  responsibility  of  the  mortgagor  it  must  be  assumed  that, 
as  in  the  case  with  ordinary  creditors,  they  took  the  chances  of 
being  mistaken,  and  unless  a  fraud  has  been  committed  by  means 
of  which  the  mortgagor's  liability  was  created  and  the  appellants 
defrauded,  they  occupy  no  other  or  no  different  position  than  or- 
dinary creditors.  The  question  as  to  the  good  faith  of  the  mort- 
gagor and  the  mortgagee  in  the  transaction  was  the  subject  of 
consideration  upon  the  trial,  and  the  court,  in  view  of  the  fact 
that  the  mortgage  was  not  executed  and  recorded  until  long  after 
the  execution  and  recording  of  the  deed  and  all  of  the  circum- 
stances, having  found  that  it  was  executed  in  pursuance  of  the 
previous  agreement  made  at  the  date  of  the  deed  to  secure  the 
purchase-money,  we  think  the  appellants  have  no  ground  for 
claiming  that  it  could  be  regarded  as  a  secret  lien  which  entitled 
their  judgments  to  a  priority.  Considering  the  finding  referred  to 
there  is  no  principle  laid  down  in  the  reported  cases  which  au- 
thorizes the  appellants  to  take  precedence  over  the  mortgage  of 
the  plaintiff.  .  .  . 

The  judgment  should  be  affirmed. 

All  concur,  except  Rapallo  and  Earl,  J  J.,  dissenting. 
Tracy,  J.,  absent. 


644  PRIORITIES 

PICKETT  v.   BARRON 

Supreme  Court  of  New  York,  1859 

(29  Barbour,  505) 

On  the  24th  day  of  July,  1855,  the  defendant  Louis  Barron  exe- 
cuted his  bond  to  Mary  Tower,  for  the  sum  of  S200,  and  to  secure 
the  payment  thereof,  he,  on  the  same  day,  with  his  wife,  the  other 
defendant,  executed  to  said  Mary  Tower  a  mortgage  on  real  estate 
in  the  city  of  Rochester.  This  mortgage  was  recorded  in  Monroe 
county  clerk's  office  on  the  day  of  its  execution.  On  the  30th  day 
of  January,  1856,  Mary  Tower  sold  and  assigned  this  bond  and 
mortgage  to  Elias  Pond,  for  a  valuable  consideration,  and  at  the 
time  of  the  assignment,  Louis  Barron  certified  in  writing  that  the 
bond  and  mortgage  were  valid,  and  that  there  was  no  defense 
thereto.  On  the  23d  day  of  May,  1857,  Elias  Pond  sold  and  as- 
signed the  same  to  John  Greig,  and  on  the  same  day,  Greig  as- 
signed the  bond  and  mortgage  to  Mary  E.  Barron,  the  wife  of  Louis 
Barron.  This  last  assignment  was  never  recorded;  and  according 
to  the  report  of  the  referee  it  was  understood  by  Barron  and  his 
wife,  and  Greig,  that  the  same  should  not  be  recorded.  Prior  to 
the  execution  of  the  mortgage,  the  p^'emises  were  conveyed  to 
Mrs.  Barron,  by  her  husband,  or  by  his  procurement.  On  the  16th 
day  of  July,  1857,  John  Greig  sold  and  assigned  this  bond  and  mort- 
gage to  the  plaintiff,  as  collateral  security  for  the  payment  of  the 
sum  of  $177.68.  This  action  was  brought  to  foreclose  the  mortgage, 
and  the  complaint  contained  the  usual  averments  in  such  cases, 
and  stated  among  others  the  above  facts.  The  defendants,  Louis 
Barron  and  his  wife,  answered  separately.  Mary  E.  Barron  al- 
leged that  John  Greig,  on  the  23d  day  of  May,  was  the  owner  and 
holder  of  the  bond  and  mortgage,  and  the  moneys  due  and  to 
grow  due  thereon;  that  he  on  that  day  sold  and  assigned  the  same 
to  her,  and  that  since  that  time  she  has  been  and  now  is  the  owner 
and  holder  thereof.  Louis  Barron,  in  his  answer,  alleged  that  on 
the  23d  day  of  May,  1857,  he  paid  to  Elias  Pond,  the  then  holder 
and  owner  of  the  bond  and  mortgage,  the  money  due  thereon.  The 
issues  made  by  these  pleadings  were  referred,  for  trial,  to  the  Hon. 
Addison  Gardiner.  He  found  "that  the  consideration  of  the  as- 
signment of  the  bond  and  mortgage,  from  Greig  to  the  plaintiff, 
was  $100  in  money,  and  the  balance  of  the  sum  mentioned  in  said 
assignment,  $77.68,  consisted  of  an  account  for  money  lent  and  for 


PICKETT   V.    BARRON  645 

groceries  delivered  to  said  Greig,  and  to  one  Studley,  which  was 
then  and  there  received  and  had  by  said  Greig."  He  also  found 
that  the  plaintiff  made  the  advances  and  received  the  assignment 
of  the  bond  and  mortgage  in  good  faith  and  without  notice  of  any 
claim  thereto  in  behalf  of  any  other  person.  And  he  found,  as  con- 
clusions of  law,  from  the  above  facts,  that  the  bond  and  mortgage 
were  a  valid  security  in  the  hands  of  the  plaintiff  for  $177.68  and 
interest;  and  that  the  plaintiff  was  entitled  to  judgment  for  that 
sum  with  costs.  From  the  judgment  entered  at  a  special  term, 
upon  this  report,  the  defendants  appealed. 

By  the  Court,  E.  Darvin  Smith,  J.  The  assignment  by  Greig 
to  the  plaintiff,  of  the  bond  and  mortgage  in  controversy  in  this 
action,  was  a  gross  fraud.  Whether  or  not  the  plaintiff  can  main- 
tain his  title  to  such  bond  and  mortgage,  acquired  by  such  fraud, 
is  the  question  arising  on  this  appeal.  At  the  time  of  the  assign- 
ment, the  bond  and  mortgage  actually  and  equitably  belonged  to 
the  defendant  Mary  E.  Barron,  but  the  assignment  to  her  was  not 
recorded.  The  statute  (2  R.  S.  40,  §  1,  3d  ed.)  declares  "that  every 
unrecorded  conveyance  shall  be  void  as  against  any  subsequent 
purchaser  in  good  faith  and  for  a  valuable  consideration  of  the 
same  real  estate,  whose  conveyance  shall  be  first  duly  recorded." 
The  plaintiff's  assignment  was  first  recorded,  and  section  69  of 
the  statute  declares  that  the  term  ^' pur  chaser, ^^  as  used  in  that 
statute,  shall  be  construed  to  embrace  "every  assignee  of  a  mort- 
gage." The  assignment  from  Greig  to  the  plaintiff  purports,  upon 
its  face,  to  have  been  made  "as  collateral  security  for  $177.68." 
The  referee  finds,  and  the  proof  clearly  justified  the  finding, 
that  $100  in  cash  was  advanced  at  the  time  of  the  assignment,  in 
consideration  thereof,  and  that  the  $77.68  was  for  a  pre-existing 
debt  of  Greig  and  one  Studley  to  the  plaintiff.  The  referee  also 
finds  that  the  plaintiff  made  the  advance  and  took  the  assignment 
in  good  faith  and  without  notice  of  any  other  claim  to  the  bond  and 
mortgage;  and  this  finding  on  this  question  of  fact  is  fully  war- 
ranted by  the  evidence.  The  plaintiff,  therefore,  has  an  assignment 
of  this  bond  and  mortgage  in  due  form  from  the  apparent  owner, 
as  appeared  from  the  record,  together  with  the  possession  of  the 
bond  and  mortgage  itself,  and  is  a  subsequent  purchaser  in  good 
faith,  for  a  valuable  consideration,  and  his  conveyance  is  first 
recorded.  His  title  to  the  bond  and  mortgage  is  therefore  perfect 
under  the  statute. 

But  the  plaintiff  is  not  a  bona  fide  purchaser,  except  as  to  the 


646  PRIORITIES 

$100,  advanced  at  the  time  of  the  assignment,  So  far  as  relates  to 
the  $77.68,  that  was  a  past  consideration,  and  the  equity  of  Mrs. 
Barron  is  superior  to  his.  To  constitute  a  bona  fide  purchaser  within 
the  meaning  of  the  recording  acts,  the  party  receiving  the  subse- 
quent conveyance  must  not  only  have  received  the  same  without 
notice  of  the  prior  unrecorded  deed,  but  he  must  have  received  the 
same  upon  some  new  consideration  advanced  at  the  time,  or  must 
have  relinquished  some  security  for  a  pre-existing  debt  due  him. 
{Dickerson  v.  TiUinghast,  4  Paige,  222.  Stuart  v.  Kissam,  2  Barb. 
493.    Wood  V.  Chapin,  3  Kern.  509.) 

And  when  a  party  has  obtained  the  legal  title,  if  he  has  paid  out 
a  part  of  the  consideration  or  value  of  the  property,  he  is  entitled  to 
be  considered  a  bona  fide  purchaser  pro  tanto.  {Peahody  v.  Fenton,. 
3  Barb.  Ch.  498.  Stalker  v.  McDonald,  6  Hill,  96.)  The  case  last 
cited,  it  is  true,  was  the  case  of  a  promissory  note.  But  the  analogy 
between  the  case  of  a  person  claiming  the  rights  of  a  ho7ia  fide 
holder  of  negotiable  paper  and  a  person  claiming  to  be  a  subse- 
quent purchaser  for  a  valuable  consideration,  under  the  recording 
acts,  is  quite  perfect,  and  there  is  no  reason  why  the  rule  of  law 
should  not  apply  to  them  alike. 

So  far  as  the  plaintiff  took  this  bond  and  mortgage  as  a  security 
for  the  debt  of  Greig  and  Studley,  he  is  in  no  worse  condition  than 
he  was  before,  and  his  equity  is  not  superior  to  that  of  Mrs.  Barron. 
Her  prior  equitable  title  and  rights  should  prevail,  except  so  far  as 
the  protection  of  the  statute  in  express  terms  extends  to  the  plain- 
tiff as  "a  subsequent  purchaser  in  good  faith  and  for  a  valuable  con- 
sideration;'' that  is,  so  far  as  a  new  consideration  was  presently 
paid  or  advanced  in  consideration  of  the  transfer  of  such  bond  and 
mortgage.  The  referee  therefore  erred,  so  far  as  he  directs  judg- 
ment for  the  plaintiff  for  all  of  the  plaintiff's  claim  exceeding  SlOO 
and  interest  thereon;  and  the  judgment  is  so  far  erroneous.  I  am 
by  no  means  sure  that  the  assignment  of  the  mortgage  to  Mrs. 
Barron  did  not  merge  the  equitable  into  the  legal  estate  so  that 
nothing  of  interest  in  the  mortgage  remained  capable  of  assign- 
ment to  the  plaintiff.  But  as  this  point  was  not  raised  before  the 
referee,  or  considered  by  him,  or  particularly  discussed  here,  I 
do  not  think  it  proper  for  the  court  now  to  pass  upon  that  question. 
I  think  there  should  be  a  new  trial,  and  as  neither  party  has  entirely 
succeeded,  neither  party  should  have  costs  of  the  appeal. 

New  trial  granted.^ 

1  Accord,  Ten  Eyck  v.  Witbeck,  135  N.  Y.  40,  47  (1892). 


\VTIEELER   l\    KIRTLAND  647 

WHEELER  V.  KIRTLAND 

Court  of  Errors  and  Appeals  of  New  Jersey,  1873 

(2^  N.  J.  Eq.  552) 

Van  Syckel,  J. 

The  cross-appeals  in  these  cases  were  argued  and  will  be  con- 
sidered together. 

It  is  a  struggle  between  creditors  for  priority  of  payment  of 
their  several  claims  out  of  the  estate  of  John  Kirtland. 

The  conflicting  claims  are  as  follows :     . 

1.  A  mortgage  on  real  estate  in  Essex  county,  for  $4,000,  dated 
July  1st,  1856,  executed  by  John  Kirtland  to  George  W.  Kirtland, 
his  brother; 

2.  A  mortgage  on  the  same  lands,  for  $7,500,  dated  Novem- 
ber 23d,  1864,  by  John  Kirtland  to  George  W.  Kirtland  as  trustee 
for  Catharine  Kirtland,  the  wife  of  John,  and  for  Jared  T.  Kirt- 
land, a  minor, 

3.  A  judgment  for  $16,695,  recovered  in  the  Essex  Circuit  Court, 
February  13th,  1865,  by  George  W.  Kirtland  against  John  Kirt- 
land and  his  son  George  Kirtland. 

4.  A  judgment  recovered  by  Andrew  Henderson  in  the  Essex 
Circuit  Court,  April  11th,  1865,  for  $8,378,  against  the  same  de- 
fendants. 

5.  A  judgment  recovered  by  Wheeler  and  Green  in  the  Supreme 
Court  of  this  state,  against  said  John  and  his  son  George,  on  the 
16th  day  of  December,  1869,  for  $68,246. 

Wheeler  and  Green  attack  the  bona  fides  of  the  $4,000  mortgage, 
and  the  judgment  of  George  W.  Kirtland.  The  evidence  shows 
circumstances  of  strong  suspicion  against  them,  but  the  fraud  is 
not  proven  with  sufficient  clearness  to  justify  this  court  in  setting 
them  aside. 

In  1862,  Catharine  Kirtland  and  her  son  George  formed  a 
partnership  for  the  transaction  of  the  business  of  brokers,  under 
the  firm  name  of  Kirtland  &  Co.,  into  which  Catharine  put  a 
capital  of  about  $5,000,  and  George  about  $250.  They  conducted 
the  business  until  January  1st,  1864,  when  Catharine  retired, 
and  John,  her  husband,  took  her  place  in  the  firm,  the  name  of 
which  remained  unchanged. 

At  the  time  Catharine  withdrew  from  the  firm,  Kirtland  &  Co. 
were  manifestly  insolvent.     At  that  time  John  did  not  agree  to 


648  PRIORITIES 

pay  her  anything  for  her  interest  in  the  firm,  and  no  promise  will 
be  impHed,  as  it  was  worth  nothing.  All  that  she  had  in  the  busi- 
ness belonged  to  the  creditors. 

On  the  23d  of  November,  1864,  prior  to  which  time  the  debt  of 
Wheeler  and  Green  had  been  contracted,  John  Kirtland  executed 
the  $7,500  mortgage  to  George  W.  Kirtland  as  trustee,  to  secure 
to  Catharine  the  sum  which  she  had  put  in  the  firm,  and  to  the 
minor,  Jared  T.  Kirtland,  the  sum  of  $1,500  of  his  funds,  which 
had  also  been  used  in  the  same  way.  At  the  last  mentioned  date, 
John  and  his  son  George  were  insolvent,  and  they  had  no  right  to 
divert  from  their  creditors  any  part  of  their  assets  and  apply  them 
to  the  payment  of  a  claim  for  which  neither  of  them  was  in  any- 
wise responsible.  This  mortgage,  so  far  as  it  secured  or  attempted 
to  secure  the  claim  of  Catharine,  was  purely  voluntary,  and  there- 
fore void  as  against  creditors,  but  it  is  valid  so  far  as  it  prefers  the 
debt  to  Jared  T.  Kirtland.  That  was  a  just  debt  for  money  of  the 
minor  used  by  John  in  the  transactions  of  the  firm,  and  must, 
therefore,  maintain  its  standing  according  to  the  date  of  the  execu- 
tion of  the  security.  This  mortgage  is  given  to  George  W.  Kirt- 
land, trustee,  and  "his  successors"  instead  of  "his  heirs,"  which 
the  Kirtlands  allege  is  a  mistake,  and  they  seek  to  have  it  reformed 
by  substituting  the  word  "heirs"  for  "successors."  There  is  no 
evidence  in  the  cause  to  show  that  there  was  any  agreement  that 
the  fee  should  be  conveyed,  and  the  mortgage  as  it  stands  without 
the  word  "heirs,"  carries  only  the  Ufe  estate.  It  is  unnecessary, 
therefore,  to  discuss  how  far  mortgages  may  be  reformed  or  equi- 
table liens  estabhshed,  as  against  creditors.  There  is  no  parol 
agreement  which  could  be  enforced  under  any  view  of  the  law. 
Where  the  equities  are  equal,  the  maxim  is,  "prior  est  in  tempore, 
potior  est  in  jure." 

An  equitable  mortgage  for  a  precedent  debt  has  no  equity  su- 
perior to  that  of  a  valid  subsequent  judgment  at  law.  Between 
such  contestants,  the  first  perfected  legal  lien  should  prevail. 
The  rule  is  otherwise  with  regard  to  bona  fide  purchasers  or  equi- 
table mortgagees,  where  the  consideration  of  the  mortgage  is  paid 
at  the  time  it  is  given.  Equity  in  the  latter  case  regards  the  equi- 
table mortgagee  as  a  bona  fide  purchaser. 

The  entire  indebtedness  to  Wheeler  and  Green  accrued  between 
July,  1864,  and  the  following  10th  of  November.  In  the  judgment 
of  George  W.  Kirtland,  is  included  a  $5,000  note,  given  to  him  by 
Kirtland  &  Co.,  while  Catharine  was  a  member  of  that  firm.  On 
the  6th  of  February,  1865,  a  few  days  prior  to  the  confession  of 


WHEELER    r.    KIRTLAND  649 

this  judgment,  John  Kirtland  and  George  Kirtland,  being  then 
insolvent,  took  up  this  note,  and  gave  for  it,  together  with  their 
own  indebtedness  to  George  W.,  a  note  for  S16,695,  upon  which 
judgment  was  entered  February  13th,  1865.  John  Kirtland  and 
George  Kirtland  being  insolvent,  had  no  right,  as  against  their 
creditors,  to  assume  the  debts  of  other  parties.  The  judgment  of 
George  W.  Kirtland,  so  far  as  it  includes  the  debt  of  the  prior 
firm,  should  be  postponed  to  the  judgment  of  Wheeler  and  Green. 

It  is  alleged  that  no  execution  has  been  issued  upon  the  judg- 
ment of  Andrew  Henderson,  and  if  this  is  true,  it  loses  its  priority 
over  the  judgment  upon  which  execution  has  been  issued,  and 
levy  thereunder  made.  The  fact  will  be  ascertained  in  the  court 
below  by  reference  to  a  master. 

The  result  is,  that  the  following  order  of  priority  should  be  de- 
creed : 

1.  The  $4,000  mortgage  to  George  W.  Kirtland. 

2.  The  mortgage  of  the  life  estate  to  George  W.  Kirtland, 
trustee,  so  far  as  it  secures  the  claim  of  Jared  T.  Kirtland. 

3.  The  judgment  of  George  W.  Kirtland,  except  so  far  as  it 
secures  the  payment  of  the  note  given  by  Catharine  Kirtland  and 
George  Kirtland,  under  the  name  of  Kirtland  &  Co.;  to  that  ex- 
tent it  must  be  postponed  to  Wheeler  and  Green's  claun. 

4.  The  judgment  of  Wheeler  and  Green. 

The  amount,  if  anything,  due  to  Henderson,  and  his  place,  must 
be  settled  in  the  court  below,  upon  the  facts  being  ascertained. 
The  decree  appealed  from,  directs  that  Henderson  have  liberty 
to  prove  his  judgment  and  assert  his  priority,  if  so  disposed. 

In  my  opinion,  therefore,  the  case  should  be  remitted,  and  the 
decree  of  the  Chancellor  modified,  so  as  to  conform  to  the  views 
I  have  expressed. 


The  whole  court  concurred 


>  In  Martin  v.  Boxver,  51  N.  J.  Eq.  is  entitled    to   priority  over  a   sub- 

452   (1893),   held,   the  holder  of  an  sequent    legal    mortgage     given     to 

unrecorded    equitable    charge    upon  secure   a   prior    indebtedness.       Per 

land,  given  for  a  full  consideration  Pitney,  V.  C,  citing  the  principal 

moving  at  the  date  of  its  creation,  caae. 


650  PRIORITIES 


SULLIVAN  V.  CORN  EXCHANGE  BANK 

Supreme  Court  of  New  York,  Appellate  Division,  Second 
Department,  1912 

(154  App.  Div.  292) 

Separate  Appeals  by  the  defendants.  Corn  Exchange  Bank 
and  W.  &  J.  Sloane,  each  from  so  much  of  an  order  of  the  Supreme 
Court,  made  at  the  Kings  County  Special  Term  and  entered  in 
the  office  of  the  clerk  of  the  county  of  Kings  on  the  11th  day  of 
October,  1912,  as  grants  judgment  to  the  plaintiff  on  the  plead- 
ings against  such  appellant. 

Burr,  J.  From  an  order  granting  plaintiff's  motion  for  judg- 
ment on  the  pleadings  this  appeal  comes. 

The  complaint  alleges  that  on  October  31,  1910,  defendant 
Monahan  was  justly  indebted  to  plaintiff  in  the  sum  of  $4,000, 
and  as  security  for  the  payment  of  such  indebtedness  promised 
to  execute  his  bond  for  that  amount,  bearing  date  on  that  day, 
secured  by  a  mortgage  on  real  property  in  Kings  county.  On  the 
date  named  he  did  execute  and  deliver  such  a  mortgage,  but  failed 
to  execute  and  deliver  the  bond.  The  mortgage  contained  a  re- 
cital that  Monahan  was  indebted  to  plaintiff  in  the  sum  named, 
''secured  to  be  paid  by  his  certain  bond  or  obligation,  bearing  even 
date  herewith,  conditioned  for  the  payment  of  the  said  sum  of" 
$4,000.  The  grant  of  the  land  described  in  the  mortgage  was 
stated  to  be  "for  the  better  securing  the  payment  of  the  said  sum 
of  money  mentioned  in  the  condition  of  the  said  bond  or  obliga- 
tion, with  interest  thereon,  and  also  for  and  in  consideration  of 
one  dollar."  The  mortgage  contained  an  express  covenant  to 
"pay  the  indebtedness  as  hereinbefore  provided."  The  mortgage 
was  duly  recorded  January  27,  1911.  Prior  to  the  commencement 
of  this  action,  which  was  on  or  about  August  12,  1912,  payment 
was  demanded  of  the  amount  of  such  indebtedness,  to  wit,  S4,000, 
with  interest  from  October  31,  1910.  Upon  default  of  payment 
this  action  was  brought  for  a  foreclosure  of  said  mortgage.  As 
incidental  relief  plaintiff  demanded  that  "said  mortgage  be  re- 
formed by  omitting  therefrom  the  recital  in  (sic)  the  giving  of  said 
bond."     Defendants  Corn  Exchange  Bank  and  W.  &  J.  Sloane, 


SULLIVAN    V.    CORN    EXCHANGE   BANK  651 

each  a  domestic  corporation,  separately  answered,  denying  none 
of  the  allegations  of  the  complaint,  but  setting  up,  the  Corn  Ex- 
change Bank  that  on  the  10th  day  of  January,  1911,  it  recovered 
a  judgment  against  said  Monahan  in  an  action  in  the  Supreme 
Court  for  $8,157.30,  which  judgment  was  docketed  in  the  office  of 
the  clerk  of  Kings  county  on  January  11,  1911,  and  W.  &  J.  Sloane 
that  it  also  recovered  a  judgment  against  said  Monahan  on  Janu- 
ary 10,  1911,  in  an  action  in  the  Supreme  Court  for  $17,733.74, 
which  judgment  was  also  docketed  in  said  clerk's  office  January  11, 
1911.  No  attack  is  made  upon  the  bona  fides  of  said  mortgage, 
nor  do  defendants  contend  that  it  was  given  in  fraud  of  creditors. 
Plaintiff's  motion  for  judgment  on  the  pleadings  was  granted,  and 
the  question  here  is  solely  one  of  priority  of  lien. 

The  mortgage  in  question  became  and  was  from  the  date  of  its 
delivery  a  perfectly  valid  lien  and  incumbrance  upon  the  premises 
therein  described,  as  between  the  parties  thereto.  Even  if  it  was 
given  to  secure  payment  of  an  antecedent  debt,  the  same  rule  ap- 
plies as  between  the  parties  and  against  all  others  who  had  at  the 
time  no  equitable  interest  in  the  property,  or  who  did  not  acquire 
rights  as  subsequent  purchasers  or  incumbrancers  for  value.  (1 
Jones  Mort.  [3d  ed.],  §458;  Young  v.  Guy,  23  Hun,  1;  aff'd.,  87 
N.  Y.  457;  Obermeyer  &  Liebmann  v.  Jung,  51  App.  Div.  247.) 
The  fact  that  no  bond  was  actually  given  at  the  date  of  the  execu- 
tion and  delivery  of  the  mortgage  does  not  impair  it,  since  there 
was  other  sufficient  consideration  therefor.  (1  Jones  Mort.  [3d 
ed.],  §  353;  Goodhue  v.  Berrien,  2  Sandf.  Ch.  630;  Baldwin  v.  Raplee, 
4  Ben.  433.)  Its  validity  does  not  depend  upon  the  form  of  the 
indebtedness,  whether  by  note,  bond  or  otherwise,  but  upon  the 
existence  of  the  debt  which  it  was  given  to  secure.  (Goodhue  v. 
Berrien,  supra;  Burger  v.  Hughes,  5  Hun,  180;  aff'd.,  63  N.  Y.  629.) 
This  case  is  distinguishable  from  Bergen  v.  Urbahn  (83  N.  Y.  49, 
51),  where  a  bond  was  in  fact  given,  which  was  not  produced  upon 
the  trial,  nor  was  any  explanation  offered  for  the  failure  to  produce 
the  same.  The  mortgage  itself  contains  an  express  covenant  to 
pay  the  debt,  and  the  fact  that  no  date  is  specified  when  it  shall 
become  payable  does  not  render  it  unenforcible.  Either  the  right 
to  enforce  it  accrues  immediately  (Purdy  v.  Philips,  11  N.  Y.  406; 
Eaton  V.  Truesdail,  40  Mich.  l;Rhoads  v.  Reed,  89  Penn.  St.  436), 
or  it  may  be  enforced  after  the  lapse  of  a  reasonable  time  and 
upon  demand.  The  complaint  alleges  demand,  and  if  the  rule  of 
reasonable  time  does  apply,  it  is  for  defendant  to  show  that  a 
lapse  of  nearly  two  years  after  delivery,  without  payment  of  either 


652  PRIORITIES 

interest  on  the  debt  or  taxes  or  assessments  upon  the  property, 
is  not  such  reasonable  time. 

We  think,  therefore,  that  without  reformation  the  mortgage  was 
a  vahd  and  enforcible  legal  obligation  on  plaintiff's  land,  and  as 
against  defendants,  judgment  creditors  of  Monahan,  a  lien  prior 
to  the  lien  of  such  judgments,  even  though  the  mortgage  was  not 
recorded  until  after  the  judgments  were  docketed.  The  cases  relied 
upon  by  appellants  {Ogden  v.  Ogden,  180  111.  543;  Whiting  Paper 
Co.  V.  Busse,  95  111.  App.  288;  Bramhall  v.  Flood,  41  Conn.  68; 
Porter  v.  Smith,  13  Vt.  492)  are  clearly  distinguishable.  In  the 
Ogden  case  it  appeared  that  no  actual  indebtedness  existed  at  the 
time  of  the  delivery  of  the  mortgage,  nor  until  the  delivery  of 
the  note  recited  therein,  which  was  some  six  3'ears  subsequent  to  the 
date  of  the  execution  of  the  mortgage,  and  in  the  meantime  the 
right  of  subsequent  incumbrancers  had  intervened.  In  the  case 
of  Whiting  Paper  Co.,  (supra),  the  original  security  had  been  sur- 
rendered, the  bona  fides  of  the  debt  was  questioned,  and  the  rights 
of  subsequent  incumbrancers  had  also  intervened.  In  Porter  v. 
Smith,  (supra),  where  plaintiff  held  two  promissory  notes  of  de- 
fendant and  it  was  agreed  that  two  new  notes  should  be  given, 
secured  by  a  mortgage,  and  the  mortgage  was  drawn  correctly  de- 
scribing said  notes,  but,  by  mistake,  the  new  notes  were  retained 
by  the  debtor  and  the  old  notes  returned  to  the  creditor,  the  mort- 
gagee, all  that  was  held  was  that  the  mortgagee  could  not  proceed 
at  law  in  ejectment  as  he  might  otherwise  have  done,  but  must 
proceed  in  equity  to  enforce  his  claim.  In  Bramhall  v.  Flood  (supra) , 
the  decision  rested  upon  the  peculiar  provisions  of  the  Recording 
Act  of  that  State,  which  would  seem  to  put  judgment  creditors 
upon  a  similar  footing  with  purchasers  and  incuml^rancers  for 
value.  (See  Pettibone  v.  Griswold,  4  Conn.  158.)  Our  statute  only 
provides  that  every  conveyance  (and  for  the  purposes  of  the  Re- 
cording Act  a  mortgage  is  within  the  definition  of  a  conveyance) 
not  recorded  as  therein  required  "is  void  as  against  any  subse- 
quent purchaser  in  good  faith  and  for  a  valuable  consideration, 
from  the  same  vendor,  his  heirs  or  devisees,  of  the  same  real  prop- 
erty or  any  portion  thereof,  whose  conveyance  is  first  duly  re- 
corded." (Real  Prop.  Law  [Consol.  Laws,  chap.  50;  Laws  of  1909,. 
chap.  52],  §  291.)  A  judgment  creditor  is  not  such  a  purchaser, 
and  an  unrecorded  conveyance  has  a  preference  over  a  judgment 
unless  there  is  a  superior  equity  in  favor  of  the  holder  of  the  latter. 
(Thomas  v.  Kelsey,  30  Barb.  268;  Flagler  v.  M alloy,  9  N.  Y.  Supp. 
573;  Obermeyer  &  Liebmann  v.  Jung,  supra;  Russell  v.  Wales,  lift 


SULLIVAN    V.    CORN    EXCHANGE    BANK  653 

App.  Div.  536.)     But  if  it  could  be  successfully  claimed  that  the 
instrument  under  consideration  was  so  defective  in  form  as  to  be 
invalid  as  a  legal  obligation,  it  might  still  be  sustained  as  an  equi- 
table mortgage.    "An  equitable  mortgage  may  also  be  constituted 
by  any  writing  from  which  the  intention  may  be  gathered ;  and  an 
attempt  to  make  a  legal  mortgage,  which  fails  for  want  of  some 
solemnity,  is  valid  in  equity."     (Miller  Eq.  Mort.  1;  Payne  v. 
Wilson,  74  N.  Y.  348;  Perry  v.  Board  of  Missions,  etc.,  of  Albany, 
102  id.  99;  Hamilton  Trust  Co.  v.  Clemes,  163  id.  423;  Hughes  v 
Edwards,  9  Wheat.  489;  Flagg  v.  Mann,  2  Sumn.  486.)     It  is  not 
necessary  to  bring  an  action  to  reform  an  equitable  mortgage 
so  as  to  make  it  a  legal  obligation  in  order  to  enforce  it.    {Sprague 
v.  Cochran,  144  N.  Y.  104.)    An  equitable  mortgage  takes  prec- 
edence over  a  lien,  whether  general  or  special,  which  only  attaches, 
as  does  a  judgment,  to  such  right,  title  or  interest  as  the  debtor 
has  in  real  property.     (Matter  of  Howe,  1  Paige,  125;  Keirsted  v. 
Avery,  4  id.  9;  Dwight  v.  Newell,  3  N.  Y.  185;  Chase  v.  Peck,  21  id. 
581;  Robinson  v.  Williams.  22  id.  380;  Payne  v.  Wilson,  supra.) 
If  this  controversy  had  arisen  between  purchasers  or  incumbranc- 
ers of  the  property  in  question,  the  fact  that  the  mortgage  was 
given  to  secure  an  antecedent  debt  might  have  been  a  factor  of 
consequence,  since  in  such  case,  in  the  absence  of  an  enforcible 
agreement  to  extend  the  time  for  the  payment  of  the  debt,  plaintiff 
might  not  be  deemed  a  purchaser  for  value  within  the  meaning  of 
the  Recording  Act.     (Real  Prop.  Law,  supra,  §291;  O'Brien  v. 
Fleckenstein,  180  N.  Y.  350.)     But  in  the  case  of  a  judgment  cred- 
itor who  can  claim  no  benefit  under  the  provisions  of  the  said  act, 
if  the  mortgage  was  valid  between  the  parties  we  can  see  no  reason 
for  any  distinction  in  the  absence  of  some  superior  or  at  least 
equal  equity.     The  only  authority  which  we  have  been  able  to 
find  directly  to  the  contrary  is  the  case  of  Wheeler  v.  Kirtland  (24 
N.  J.  Eq.  552).    The  statement  in  the  opinion  to  that  effect  cites 
no  authority  in  support  of  it,  and  it  seems  to  us  to  be  directly  con- 
trary to  the  authorities  in  this  State  to  which  reference  has  been 
made.    In  this  case  no  superior  equity  is  shown  on  the  part  of  the 
judgment  creditors.    It  does  not  appear  that  the  debts  were  even 
in  existence  at  the  time  when  the  mortgage  in  suit  was  given,  or 
that  they  extended  credit  to  the  mortgagor  upon  his  supposed 
ownership  of  the  premises  in  question,  free  from  the  lien  of  said 
mortgage.     If  plaintiff's  equitable  lien  had  arisen  subsequent  to 
the  docketing  of  the  judgment  or  simultaneously  therewith,  a 
different  question  would  have  been  presented  {Dwight  v.  Newell, 


654  PRIORITIKS 

supra;  Goodhue  v.  Berrien,  supra),  but  upon  the  facts  here- dis- 
closed the  order  appealed  from  was  correctly  made,  and  it  should 
be  affirmed. 

HiRscHBERG,  Thomas,  Carr  and  Woodward,  JJ.,  concurred. 

In  each  case  order  affirmed,  with  ten  dollars  costs  and  disburse- 
ments.^ 

CURTIS  V.   MOORE 

Court  of  Appeals  of  New  York,  1897 

(152  N.  Y.  159) 

Appeal  from  a  judgment  of  the  General  Term  of  the  Court  of 
Common  Pleas  for  the  city  and  county  of  New  York,  entered 
December  5,  1894,  which  affirmed  a  judgment  in  favor  of  plaintiff 
entered  upon  the  report  of  a  referee. 

Vann,  J.  On  the  nineteenth  of  October,  1885,  Edward  S.  Curtis 
conveyed  an  undivided  one-sixth  interest  in  certain  premises 
situate  in  the  city  of  New  York  to  John  B.  Armstrong  by  a  deed 
dated  that'  day  and  duly  recorded  October  26,  1885.  At  the  same 
time  the  said  Armstrong  executed  a  purchase-money  mortgage  to 
Edward  S.  Curtis  to  secure  a  note  for  $2,000,  given  by  the  former 
to  the  order  of  the  latter,  of  even  date  with  the  mortgage,  and 
payable  two  years  thereafter  with  interest  at  six  per  cent.  This 
mortgage  was  duly  recorded  November  24th,  1885.  March  29th, 
1886,  said  Edward  S.  Curtis  borrowed  the  sum  of  $500  of  the  plain- 
tiff, and  delivered  to  him  the  said  note  and  mortgage  and  gave 
him  an  instrument  of  which  the  following  is  a  copy: 

*'500.  Chicago,  111.,  Mar.  29,  1886. 

"One  day  after  date,  for  value  received,  I  promise  to  pay  to  the 
order  of  De  Witt  H.  Curtis  the  sum  of  five  hundred  dollars,  at 
Chicago,  with  interest  at  the  rate  of  8  per  cent  per  annum  after 
date,  having  deposited  with  said  D.  H.  Curtis,  as  collateral  security, 
a  certain  real  estate  mortgage  for  the  sum  of  two  thousand  dollars, 
bearing  date  of  19th  October,  1885,  given  to  E.  S.  Curtis  by  J.  R. 
Armstrong  &  Desiree  D.,  his  wife,  which  I  hereby  give  the  said 
D.  H.  Curtis,  agent  or  assignee,  authority  to  sell,  or  any  part 

^Obermeyer  &  Liebmann  V.Jung,  51       Cal.    193    (1874);   Rogers  v.   Abbott, 
App.  Div.  (N.  Y.)  247  (1900),  accord.       128  Mass.  102  (1880). 
And    see     Wilcoxson    v.    Miller,    49 


CURTIS    V.    MOORE  655 

thereof,  on  the  maturity  of  this  note,  or  at  any  time  thereafter, 
or  before,  in  the  event  of  said  securities  depreciating  in  value  in  the 
opinion  of  said  D.  H.  Curtis,  at  pubhc  or  private  sale,  at  the  dis- 
cretion of  said  D.  H.  Curtis  or  his  assignee,  without  advertising 
the  same,  or  demanding  payment,  or  giving  me  any  notice,  and  to 
apply  so  much  of  the  proceeds  thereof  to  the  payment  of  this  note 
as  may  be  necessary  to  pay  the  same,  with  all  interest  due  thereon, 
and  also  to  the  payment  of  all  expenses  attending  the  sale  of  the 
said  mortgage,  including  attorney's  fees,  and  in  case  the  proceeds 
of  the  sale  of  the  said  mortgage  shall  not  cover  the  principal, 
interest  and  expenses,  I  promise  to  pay  the  deficiency  forthwith 
after  such  sale. 

''Edward  S.  Curtis." 

On  May  20th,  1886,  Edward  S.  Curtis  borrowed  from  the  plain- 
tiff $500,  on  the  same  security  as  collateral,  and  on  August  25th 
in, the  same  year,  he  borrowed  $500  more,  each  time  giving  him  an 
instrument  similar  in  form  to  that  of  March  29,  1886,  but  none  of 
them  were  acknowledged  or  recorded.  February  7,  1887,  said 
Armstrong  conveyed  the  premises  covered  by  the  mortgage  to 
Edward  S.  Curtis  by  deed  duly  recorded  on  the  5th  of  March, 
following.  On  the  23d  of  February,  1891,  Edward  S.  Curtis,  for  a 
valuable  consideration,  conveyed  the  premises  to  the  defendant 
J.  Charles  Moore,  by  deed  duly  recorded  on  the  11th  of  April 
thereafter. 

This  action  was  brought  to  foreclose  said  mortgage,  and  the  de- 
fendant Moore  alleges  in  defense  that  he  is  a  bona  fide  purchaser  of 
the  premises  in  question  without  notice,  and  that  the  conveyance 
from  Armstrong  to  Edward  S.  Curtis  effected  a  merger  of  the  mort- 
gage. Upon  the  trial  it  did  not  appear  that  Mr.  Moore  purchased 
the  premises  either  with  or  without  actual  knowledge  of  the  out- 
standing mortgage  and  note  given  by  Mr.  Armstrong  and  trans- 
ferred to  the  plaintiff.  He  is  presumed,  however,  to  have  had 
notice  of  such  facts,  as  an  examination  of  the  record  would  have 
disclosed. 

Under  the  circumstances  above  stated,  the  plaintiff  became  the 
owner  of  the  mortgage  for  the  purpose  for  which  it  was  delivered  or 
pledged  to  him,  as  "a  good  assignment  of  a  mortgage  is  made  by 
delivery  only."  (Fryer  v.  RockfeUer,  63  N.  Y.  268-276;  Rimy  an 
V.  Mersereau,  11  Johns.  534;  Green  v.  Hart,  1  Johns.  586.)  If  the 
omission  of  the  plaintiff  to  record  the  evidence  of  the  transfer  of 
the  mortgage  to  him  inured  to  the  benefit  of  the  defendant  under 


656  PRIORITIES 

the  Recording  Act,  we  may  assume  that  the  latter  became  a  bona 
fide  purchaser  without  notice,  otherwise  not.  In  Purdy  v.  Hunting- 
tan  (42  N.  Y.  334)  the  question  was  directly  passed  upon  by  this 
court  and  decided  adversely  to  the  contention  of  the  defendant. 
It  was  held  in  that  case  that  the  assignee  of  a  recorded  mortgage 
upon  real  estate,  which  was  conveyed  by  the  mortgagor  to  the 
mortgagee  after  an  assignment  of  the  mortgage,  has  a  valid  lien  as 
against  a  purchaser  from  the  mortgagee  who  took  without  notice 
of  the  assigmnent,  notwithstanding  the  conveyance  to  the  mort- 
gagee, as  well  as  the  conveyance  from  the  mortgagee  to  the  pur- 
chaser, were  recorded  before  the  assignment  was  placed  upon 
record.  The  court  said:  "The  question  is  then  presented,  whether 
Calvin  Huntington  can  be  protected  in  his  title  as  against  the  mort- 
gage by  reason  of  the  omission  to  have  the  assignment  thereof  re- 
corded. It  is  conceded  that  he  is  to  be  charged  with  constructive 
notice  of  the  existence  of  the  mortgage,  and  of  the  continuance  of 
its  lien,  by  its  record  in  the  proper  office.  By  that  he  was  informed 
not  only  of  the  date  of  the  mortgage,  the  amount  secured  thereby, 
and  of  all  its  particulars,  but  that  it  was  open  and  uncanceled  of 
record,  and  therefore  apparently  an  outstanding  lien  and  incum- 
brance on  the  premises  of  which  he  was  taking  title.  Having  that 
information,  he  knew  or  was  at  least  chargeable  in  law  with  the 
further  notice,  that  it  was  such  lien  and  incumbrance  in  the  hands 
of  any  person  to  whom  it  had  been  legally  transferred,  and  that  the 
record  of  such  transfer  was  not  necessary  to  its  validity,  nor  as  a 
protection  against  a  purchaser  of  the  property  mortgaged  or  any 
other  person  that  a  subsequent  purchaser  in  good  faith  of  the  mort- 
gage itself  or  the  bond  or  debt  secured  thereby ;  but  on  the  con- 
trary, that  a  vendee  of  the  premises  took  it  subject  to  the  lien 
of  the  mortgage  irrespective  of  the  ownership  thereof.  That  knowl- 
edge and  notice  made  it  his  duty  in  the  exercise  of  proper  dili- 
gence to  inquire  whether  Minott  Mitchell,  his  vendor,  was  still 
the  owner  and  holder  of  the  mortgage,  and  his  omission  to  make 
that  inquiry  deprives  him  of  the  protection  of  a  6ona^c?e  purchaser." 
(Citing  Brown  v.  Blydenhurgh,  7  N.  Y.  141;  Kellogg  v.  Smith,  26 
N.  Y.  18;  Gillig  v.  Maass,  28  N.  Y.  191;  Campbell  v.  Vedder,  3  Keyes, 
174.)  The  same  principle  was  laid  down  in  an  earlier  case,  where 
the  court  said:  "The  failure  to  record  an  assignment  of  the  prior 
mortgage  could  not  blot  out  the  record  of  the  mortgage  itself. 
If  Van  Vranken  was  the  purchaser,  in  good  faith,  of  the  prior  mort- 
gage, and  an  assignment  thereof,  previously  made,  had  not  been 
recorded,  he  would  hold  the  mortgage.    But,  if  he  only  became  the 


CURTIS    V.    MOORE  657 

purchaser  of  the  premises  by  absolute  deed,  or  otlieiwi.sc.  the 
record  of  a  prior  mortgage  is  sufficient  notice  thereof  to  him,  no 
matter  how  often  assigned,  or  whether  the  assignment  be  recorded 
or  not.  The  only  alteration  made  by  the  Recording  Act  of  1830  is, 
that  an  assignment  must  now  be  recorded  as  against  a  subsequent 
bona  fide  purchaser  of  the  mortgage  assigned.  A  'subsequent 
purchaser  in  good  faith,'  in  tiie  Recording  Act,  as  to  this  case, 
means  a  purchaser  of  the  mortgage  assigned,  not  a  purchaser  of 
the  premises.  A  subsequent  purchaser  of  the  premises  is  bound 
by  a  prior  recorded  mortgage,  no  matter  who  holds  it."  (Camp- 
bell V.  Vedder,  1  Abb.  Ct.  of  App.  Dec.  295,  302;  s.  c,  3  Keyes,  174.) 
It  is  obvious  that  these  cases  are  analogous  to  the  case  before  us. 
]Mr,  Moore  was  not  a  bona  fide  purchaser  within  the  principle 
established  by  those  authorities,  because  the  record  of  the  mort- 
gage was  notice  to  him  that  the  mortgage  was  outstanding  and  un- 
satisfied, and  it  was  no  concern  of  his  who  happened  to  be  the 
owner  at  the  time.  In  dealing  with  the  property  on  the  assumption 
that  Edward  S.  Curtis  still  owned  the  mortgage,  he  acted  at  his 
peril  and  assumed  the  risk  that  Curtis  might  have  transferred  the 
mortgage  to  someone  else.  He  was  put  upon  his  inquiry,  and  it 
was  not  enough  for  him  to  examine  the  record  and  see  that  no  as- 
signment of  the  mortgage  appeared  thereon,  but  he  should  have 
required  a  satisfaction  piece  in  due  form  or  the  delivery  of  the  mort- 
gage and  note. 

The  case  of  Bacon  v.  Va7i  Schoonhoven  (87  N.  Y.  446)  is  not  in 
conflict  with  the  cases  cited  above.  In  that  case  the  mortgagee 
advanced  money  in  reliance  upon  a  satisfaction  piece  executed  by 
the  mortgagee  in  a  former  mortgage,  which  had  })een  duly  recorded 
and  in  fact  had  ])een  assigned,  but  the  assignment  was  not  re- 
corded. The  court  held  that  the  satisfaction  piece  was  a  con- 
veyance within  the  meaning  of  the  Recording  Act,  and  that  who- 
ever advanced  money  to  he  secured  by  a  bond  and  mortgage  upon 
the  faith  of  such  an  instrument  was  a  bona  fide  purchaser  within 
the  provisions  of  the  act.  This  was  the  question  before  the  court, 
and  all  that  was  decided  that  bears  upon  the  subject  now  before 
us,  although  language  somewhat  broader  in  its  application  was 
used  in  the  opinion.  Although  both  Purdij  v.  Huntington  and 
Campbell  v.  Vedder  were  cited  by  counsel  upon  the  argument, 
neither  is  referred  to  in  the  opinion,  and  it  is  clear  that  the  court 
did  not  intend  to  overrule  them.  If  Edward  S.  Curtis  had  given 
a  satisfaction  piece  of  the  mortgage  standing  on  the  record  in  his 
name,  the  case  relied  upon  by  the  defendant  would  be  applicable. 


058  PRIORITIES 

He  did  not  do  this,  however,  but  ac(*epted  title  with  constructive 
notice  of  an  uncanceled  mortgage,  recorded  and  outstanding,  with- 
out making  inquiry  or  requiring  the  production  of  the  mortgage 
itself,  or  the  note  that  it  was  given  to  secure.  Under  these  cir- 
cumstances, he  cannot  be  held  a  bona  fide  purchaser  as  against  the 
mortgage  assigned  to  the  plaintiff,  because  it  is  not  necessary  to 
record  an  assignment  of  a  recorded  mortgage  as  against  a  subse- 
quent purchaser  of  the  mortgaged  premises,  but  only  as  against  a 
subsequent  purchaser  of  the  mortgage  itself.  {Purdy  v.  Huntington, 
supra;  Campbell  v.  Vedder,  supra;  Miller  v.  Lindsey,  19  Hun,  207.) 

There  was  no  merger  because  the  ownership  of  the  mortgage, 
with  the  debt  secured  thereby,  and  the  title  to  the  land,  did  not 
meet  in  the  same  person.  When  the  fee  came  back  to  Edward  S. 
Curtis  he  had  no  title  to  the  mortgage,  for  he  had  assigned  it  some 
months  before.  There  can  be  no  merger,  at  law,  without  a  union 
of  titles  in  the  same  person ;  nor,  in  equity,  unless,  also,  there  is  an 
intention  on  the  part  of  those  concerned  in  the  transaction  that 
it  should  operate  as  a  merger.  In  this  case  both  the  union  and 
intention  Were  wanting.  {Purdy  v.  Huntington,  supra;  Smith  v. 
Roberts,  91  N.  Y.  470;  Sheldon  v.  Edwards,  35  N.  Y.  279,  284; 
Bascom  v.  Sjnith,  34  N.  Y.  320.) 

The  defendant  offered  to  show  an  agreement  between  said  Arm- 
strong and  Edward  S.  Curtis,  bearing  the  same  date  as  the  mort- 
gage, which  recited  the  conveyance  of  the  property  by  Curtis  to 
Armstrong,  and  provided  for  its  reconveyance  by  Armstrong  to 
Curtis.  It  contained  a  stipulation  that  Armstrong  "has  no  bene- 
ficial interest  in  the  above-described  property,  but  holds  it  subject 
to  a  trust."  This  agreement  was  immaterial,  and  was  properly 
excluded  on  that  account.  The  plaintiff  knew  nothing  of  it  and 
was  not  a  party  to  it.  Armstrong's  title  came  from  Curtis,  and  the 
plaintiff  could  not  be  affected  by  a  secret  agreement  between  them 
that  the  former  should  hold  the  premises  in  trust  for  the  latter, 
when,  according  to  the  record,  he  held  it  in  fee  at  the  time  the 
mortgage  was  executed,  and  the  mortgage  contained  the  recital 
that  it  was  given  to  secure  the  payment  of  a  part  of  the  purchase 
money.  Moreover,  the  plaintiff  has  the  interest  of  both  the  trustee 
and  the  cestui  que  trust,  for  the  one  executed  while  the  other  as- 
signed the  mortgage. 

After  examining  all  of  the  exceptions,  we  think  the  judgment 
was  right  and  that  it  should  be  affirmed,  with  costs. 

All  concur.^ 

'  Purdy  V.  Huntington,  42  N.  Y.  344  (1870),  accord. 


ABBOTT  V.   FROST  659 

ABBOTT  V.  FROST 
Supreme  Judicial  Court  of  Massachusetts,  1904 

(185  Mass.  398) 

Bill  in  Equity,  filed  August  12,  1903,  by  the  purchaser  at  a 
foreclosure  sale  under  a  mortgage  of  certain  real  estate  in  that 
part  of  Framingham  called  South  Framingham,  and  by  the  mort- 
gagee, to  remove  a  cloud  on  the  title  of  the  first  named  plaintiff 
by  setting  aside  a  tax  sale  to  the  defendant  alleged  to  be  invalid. 

Bradley,  J,^  At  the  time  these  taxes  were  assessed  and  when 
the  sale  took  place,  St.  of  1888,  c.  390,  §  30,  as  amended  by  St.  of 
1889,  c.  334,  §  9,  provided  that  "...  If  such  tax  remains  unpaid 
for  fourteen  days  after  demand  therefor,  it  may  with  all  incidental 
charges  and  fees  be  levied  by  sale  of  the  real  estate  within  said 
two  years,  or  after  the  expiration  of  said  two  years,  if  the  estate 
has  not  been  alienated  prior  to  the  giving  of  the  notice  of  such 
sale." 

When  a  sale  of  real  property  under  this  and  similar  statutes 
is  made  for  taxes  lawfully  assessed,  the  entire  title  or  interest  in 
the  land  passes  to  the  grantee  by  the  deed  of  the  collector,  and 
it  does  not  become  essential  to  inquire  whether  his  title  is  to  be 
considered  as  the  result  of  all  previous  titles  and  which  are  trans- 
mitted to  him  by  operation  of  law,  or  a  new  title  conferred  under  a 
taking  by  the  sovereign  power  to  enforce  a  public  right  to  which 
property  under  our  constitution  is  generally  made  subject.  See 
Harrison  v.  Dolan,  172  Mass.  395,  398;  Emery  v.  Boston  Terminal 
Co.,  178  Mass.  172,  184. 

Such  a  lien  constitutes  a  charge  or  incumbrance  on  the  land 
without  which  it  could  not  be  sold,  and  at  any  time  within  the 
limitation  a  sale  or  conveyance  would  vest  in  the  purchaser  an 
absolute  title  to  the  whole  estate  freed  from  the  mortgage  which 
was  in  existence,  and  all  outstanding  incumbrances.  Hunt  v. 
Boston,  183  Mass.  303,  305,  and  cases  cited.  .  .  . 

^  Portion  of  opinion  omitted. 


660  PRIORITIES 

ERIE  COUNTY  SAVINGS  BANK  v.  SCHUSTER 

Court  of  Appeals  of  New  York,  1907 

(187  iV.  Y.  Ill) 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Su- 
preme Court  in  the  fourth  judicial  department,  entered  October  12, 
1905,  reversing  a  judgment  in  favor  of  plaintiff  entered  upon  a 
decision  of  the  court  on  trial  at  an  Equity  Term  and  directing  a 
dismissal  of  the  complaint  as  to  the  respondents  herein. 

O'Brien,  J.  This  was  an  action  for  the  foreclosure  of  a  mort- 
gage. Several  persons  were  made  defendants  who  have  not  ap- 
peared and  judgment  went  against  them  by  default.  The  defend- 
ants, the  Schusters,  however,  appeared  and  answered,  and  the 
question  involved  in  the  case  arises  between  these  defendants  and 
the  plaintiff.  The  complaint  contains  the  usual  allegations  in 
foreclosure  cases.  It  alleges  that  the  Schusters  were  in  possession 
of  the  premises  and  claimed  under  some  right  or  title  inferior  and 
subordinate  to  the  lien  of  the  mortgage  and  the  usual  relief  in  fore- 
closure cases  was  demanded  against  them,  that  is,  that  they  be 
barred  and  foreclosed  from  all  right,  title  and  interest  in  the  mort- 
gaged premises.  The  Schusters,  in  their  several  answers,  denied 
the  allegation  of  the  complaint  that  they  claimed  under  a  title 
subordinate  to  the  lien  of  the  mortgage,  and  they  alleged  that 
they  were  in  possession  under  a  deed  executed  by  the  proper  au- 
thorities upon  a  sale  of  the  land  for  taxes  that  were  levied  subse- 
quently to  the  mortgage  in  question. 

At  the  opening  of  the  trial  the  answering  defendants  requested 
the  court  to  dismiss  the  complaint  as  to  them,  since  it  appeared 
from  the  pleadings  that  they  claimed  under  a  title  paramount  to 
the  lien  of  the  plaintiff's  mortgage.  The  court  denied  their  motion 
and  proceeded  to  take  proof  as  to  the  nature  of  the  defendants' 
claim  of  title.  When  the  proofs  were  closed  it  appeared  that  the 
lands  covered  by  the  mortgage  had  been  sold  for  taxes  levied  sub- 
sequent to  the  execution  of  the  mortgage,  and  that  they  were  bid 
in  by  the  state  and  were  afterwards  sold  by  the  commissioners  of 
the  land  office  to  the  defendants.  The  defendants  again  requested 
the  court  to  dismiss  the  complaint  as  to  them,  since  it  now  ap- 
peared that  their  title  was  paramount  to  that  of  the  plaintiff.  The 
motion  was  denied  and  the  defendants  excepted.    The  trial  court 


ERIE    COUNTY    SAVINGS    BANK   V.    SCHUSTER  01)1 

found  the  facts  here  stated  and  other  facts  as  to  the  execution  of 
the  plaintiff's  mortgage  and  the  amount  due  thereon,  and  he  di- 
rected that  the  defendants,  inchidin<j;  the  Schusters,  should  be 
forever  barred  and  foreclosed  from  any  right,  title  and  interest  in 
the  property.    There  was  an  exception  to  this  finding. 

The  answering  defendants  appealed  from  the  judgment  to  the 
Appellate  Division  and  the  decision  of  the  trial  court  was  there 
reversed  and  the  complaint  dismissed  as  to  them  and  the  plaintiff 
has  appealed  to  this  court.  We  think  that  the  judgment  is  cor- 
rect. The  appeal  of  the  plaintiff  presents  but  two  questions  of 
law,  and  in  the  opinion  of  the  learned  court  below  these  questions 
are  fully  discussed  and  the  conclusion  is  fully  sustained  by  the 
cases  in  this  state.  ^  Both  questions  are  quite  familiar,  and  it  is 
unnecessary  to  refer  to  the  authorities  upon  which  the  conclusion 
is  based.  There  can  be  no  doubt  that  a  title  resting  upon  a  sale 
of  land  for  taxes  regularly  conducted  is  paramount  to  the  lien  of 
a  prior  mortgage.  The  owner  of  such  a  mortgage  has  the  statu- 
tory right  of  redemption  upon  giving  notice  to  the  public  authori- 
ties as  to  his  right  and  title,  but  it  is  unnecessary  to  discuss  the 
proceedings  to  be  followed  in  such  a  case,  since  it  is  not  claimed 
that  the  plaintiff  complied  with  the  statute  or  is  in  an  attitude 
seeking  to  redeem.  The  plaintiff  simply  insists  that  the  lien  of 
its  mortgage  is  prior  and  superior  to  the  title  acquired  by  the  tax 
sale.  Upon  that  proposition  the  plaintiff'  rests  its  whole  contention, 
and  its  position  in  this  respect  is  obviously  untenable. 

It  is  equally  clear  that  the  defendants  in  this  case,  who  were 
in  possession  under  the  tax  title,  were  not  proper  parties  to  the 
action.  Their  title  and  possession  cannot  be  assailed  in  an  action 
to  foreclose  a  mortgage,  since  they  are  entitled  to  defend  their 
claim  in  a  court  of  law  in  the  usual  way  in  which  actions  for  the 
recovery  of  real  property  are  tried.  The  defendants  cannot  l)e 
required  to  defenci  their  title  in  an  equitable  action  like  this,  but 
are  entitled  to  have  their  rights  passed  upon  by  a  jury  in  a  court 
of  law.  It  follows  that  the  defendants  had  the  right  to  object  to 
have  their  title  tried  in  this  action,  since  it  was  not  upon  its  face 
subordinate  to  the  lien  of  the  mortgage. 

The  judgment  appealed  from  is  right  and  should  he  affirmed, 
with  costs. 

CuLLEN,  Ch.  J.,  Gray,  Edward  T.  Bartlett,  Werner  and 
Chase,  JJ.,  concur;  Hiscock,  J.,  not  sitting. 

>  See  107  App.  Div.  (X.  Y.)  46. 


662  PRIORITIES 

New  York  Real  Prop.  Law,  §290.  (1)  The  term  "real  prop- 
erty," as  used  in  this  article,  includes  lands,  tenements  and  heredita- 
ments and  chattels  real,  except  a  lease  for  a  term  not  exceeding  three 
years.  (2)  The  term  "purchaser"  includes  every  person  to  whom 
any  estate  or  interest  in  real  property  is  conveyed  for  a  valuable 
consideration,  and  every  assignee  of  a  mortgage,  lease  or  other 
conditional  estate.  (3)  The  term  "conveyance"  includes  every 
written  instrument,  by  which  any  estate  or  interest  in  real  property 
is  created,  transferred,  mortgaged  or  assigned,  or  by  which  the 
title  to  any  real  property  may  be  affected,  including  an  instru- 
ment in  execution  of  a  power,  although  the  power  be  one  of  revo- 
cation only,  and  an  instrument  postponing  or  subordinating  a 
mortgage  lien;  except  a  will,  a  lease  for  a  term  not  exceeding  three 
years,  an  executory  contract  for  the  sale  or  purchase  of  lands,  and 
an  instrument  containing  a  power  to  convey  real  property  as  the 
agent  or  attorney  for  the  owner  of  such  property.  (4)  The  term 
"recording  officer  "  means  the  county  clerk  of  the  county,  except 
in  the  counties  of  New  York,  Kings  or  Westchester,  where  it  means 
the  register  of  the  county. 

§  291.  A  conveyance  of  real  property,  within  the  state,  on  being 
duly  acknowledged  by  the  person  executing  the  same,  or  proved 
as  required  by  this  chapter,  and  such  acknowledgment  or  proof 
duly  certified  when  required  by  this  chapter,  may  be  recorded  in 
the  office  of  the  clerk  of  the  county  where  such  real  property  is 
situated,  and  such  county  clerk  shall,  upon  the  request  of  any 
party,  on  tender  of  the  lawful  fees  therefor,  record  the  same  in  his 
said  office.  Every  such  conveyance  not  so  recorded  is  void  as 
against  any  subsequent  purchaser  in  good  faith  and  for  a  valuable 
consideration,  from  the  same  vendor,  his  heirs  or  devisees,  of  the 
same  real  property  or  any  portion  thereof,  whose  conveyance  is 
first  duly  recorded. 

§  315.  Different  sets  of  books  must  be  provided  by  the  recording 
officer  of  each  county,  for  the  recording  of  deeds  and  mortgages; 
in  one  of  which  sets  he  must  record  all  conveyances  and  other 
instruments  absolute  in  their  terms  delivered  to  him,  pursuant  to 
law,  to  be  so  recorded,  which  are  not  intended  as  mortgages,  or 
securities  in  the  nature  of  mortgages,  and  in  the  other  set,  such 
mortgages  and  securities  delivered  to  him. 

§  316.  Each  recording  officer  must  provide,  at  the  expense  of  his 
county,  proper  books  for  making  general  indexes  of  instruments 
recorded  in  his  office,  and  must  form  indexes  therein,  so  as  to  afford 
correct  and  easy  reference  to  the  books  of  record  in  his  office. 


U.  S.  FIDELITY  &  GUARANTY  CO.  V.  U.  S.  &  MEXICAN  TRUST  CO.      663 

There  must  be  one  set  of  indexes  for  mortgages  or  securities  in 
the  nature  of  mortgages,  and  another  set  for  conveyances  and 
other  instruments  not  intended  as  such  mortgages  or  securities. 
Each  set  must  contain  two  lists  in  alphabetical  order,  one  consist- 
ing of  the  names  of  the  grantors  or  mortgagors,  followed  by  the 
names  of  their  grantees  or  mortgagees,  and  the  other  list  consisting 
of  the  names  of  the  grantees  or  mortgagees,  followed  by  the  names 
of  their  grantors  or  mortgagors,  with  proper  blanks  in  each  class 
of  names,  for  subsequent  entries,  which  entries  must  be  made 
as  instruments  are  delivered  for  record.  .  .  . 


UNITED  STATES  FIDELITY  &  GUARANTY  CO.  v.  UNITED 
STATES  &  MEXICAN  TRUST  CO. 

Circuit  Court  of  Appeals  of  the  United  States,  Eighth 

Circuit,  1916 

(234  Fed.  238) 

Appeal  from  the  District  Court  of  the  United  States  for  the 
District  of  Kansas;  John  C.  Pollock,  Judge. 

Bill  by  the  United  States  &  Mexican  Trust  Company  and  others 
against  the  Kansas  City,  Mexico  &  Orient  Railroad  Company  and 
others  to  foreclose  a  mortgage,  in  which  the  United  States  Fidelity 
&  Guaranty  Company  intervenes.  From  a  decree  of  foreclosure, 
allowing  the  claim  of  the  intervener  as  a  general  demand,  but  deny- 
ing it  as  an  equitable  preference  over  the  holders  of  bonds  secured 

by  the  mortgage,  the  intervener  appeals.  ,  ^        , 

Affirmed. 

Before  Sanborn  and  Smith,  Circuit  Judges,  and  Reed,  Dis- 
trict Judge. 

Sanborn,  Circuit  Judge.  This  is  an  appeal  by  the  United  States 
Fidelity  &  Guaranty  Company,  surety  on  a  supersedeas  bond  of  the 
Kansas  City,  Mexico  &  Orient  Railroad  Company,  from  a  decree  of 
the  District  Court  allowing  its  claim  in  proceedings  to  foreclose  the 
prior  mortgage  on  the  property  of  the  Railroad  Company  as  a  gen- 
eral demand,  but  denying  it  an  equitable  preference  over  the  holders 
of  the  bonds  secured  by  the  mortgage.  The  mortgage  securing  the 
bonds  covered  the  property,  the  after-acquired  property,  and  the 
income  of  the  Railroad  Company.  It  was  made  and  recorded 
about  February  1,  1901.  On  December  6,  1912,  in  the  suit  to  fore- 
close the  mortgage,  a  prior  receivership  of  the  property  of  the 


664  PRIORITIES 

Railroad  Company  was  extended  over  the  foreclosure  suit.  A  de- 
cree of  foreclosure  was  rendered  on  February  2,  1914,  in  which 
the  court  adjudged  that  the  mortgage  was  a  first  lien  upon  the 
property  and  income  of  the  Railroad  Company  to  secure  the  pay- 
ment of  bonds  issued  thereunder  to  the  amount  of  $24,538,000, 
and  that  the  property  ]>g  sold,  and  it  was  subsequently"  sold  under 
the  decree  for  $6,001,000  in  this  foreclosure  suit.  The  Fidelity 
Company  intervened,  and  prayed  that  the  court  would  order  its 
claim  to  be  paid  out  of  the  proceeds  of  the  sale  of  the  property-  in 
preference  to  the  claims  of  the  bondholders  secured  by  the  mort- 
gage. 

Its  claim  arose  in  this  way:  One  Madison,  on  June  19,  1911,  re- 
covered a  judgment  in  one  of  the  district  courts  of  Kansas  against 
the  Railway  Company,  on  account  of  a  personal  injury  caused  by 
the  negligence  of  servants  of  the  company,  for  $9,000  and  costs, 
from  which  the  Railway  Company  appealed.  At  the  request  of 
the  Railway  Company  the  Fidelity  Company  made  and  filed  a 
supersedeas  bond  to  stay  the  collection  of  the  judgment,  the  judg- 
ment was  subsequently  affirmed,  and  the  Fidelity  Company  paid 
the  penalty  of  the  bond,  $10,247.05. 

■  The  first  reason  presented  to  this  court  for  the  reversal  of  the 
decree  below  is  that  the  court  failed  to  investigate,  fix,  and  enforce 
the  liability  of  the  stockholders  of  the  Railway  Company  to  pay 
for  their  stock  and  to  apply  the  payments  that  should  thus  be 
collected  to  a  liquidation  of  the  mortgage  bonds.  But  the  Fidelity 
Company  presents  this  ground  for  relief  for  the  first  time  in  this 
court  without  pleading  it  in  its  intervening  petition,  or  introducing 
any  evidence  below  to  sustain  it,  and  without  giving  the  trustee 
of  the  bondholders  any  notice  of  such  a  claim,  or  any  opportunity 
to  challenge  it,  or  to  produce  evidence  to  defeat  it  in  the  court 
below.  It  is  clearly  too  late  to  urge  this  contention  for  the  first 
time  now,  and  the  consideration  or  maintenance  of  it  by  this 
court  under  these  circumstances  would  be  unjust  and  inequitable. 

The  second  argument  is  that  the  judgment  in  Madison's  personal 
injury  suit  was  rendered  on  June  19,  1911;  that  at  that  time  and 
when  the  supersedeas  bond  was  given  the  Railway  Company  was  in 
default  in  the  payment  of  its  interest  on  its  })onds,  and  was  insolv- 
ent; that  the  Fidelity  Company  had  no  knowledge  of  these  facts; 
that  if  it  had  known  them  it  would  not  have  signed  the  bond, 
but  that  the  holders  of  the  bonds  and  coupons  neither  foreclosed 
their  mortgage  nor  gave  any  notice  of  the  financial  conditions  of 
the  Railway  Company  to  the  Fidelity  Company  before  it  made  its 


U.  S.  FIDELITY  &  GUARANTY  CO.  V.  V.  S.  &  MEXICAN  TRUST  CO.       665 

bond;  and  that  in  view  of  these  facts  they  are  estopped  from  main- 
taining the  superior  Hen  of  their  prior  mortgage.  The  proof, 
however,  leaves  no  doubt  that  there  had  been  no  default  in  the 
paj^ment  of  the  interest  on  the  bonds  when  the  supersedeas  bond 
was  given.  All  the  coupons  which  were  due,  and  which  had  been 
presented  at  their  respective  places  of  payment,  had  been  paid. 
A  small  percentage  of  the  bondholders  had  not  yet  presented  their 
overdue  coupons,  and  those  were  still  unpaid.  Nor  would  the 
facts,  if  they  had  existed,  that  the  Railway  Company  was  insolvent, 
that  the  bondholders  knew  of  this  insolvency  and  the  Fidelity 
Company  did  not,  that  the  bondholders  did  not  inform  that 
company  of  the  insolvency,  and  that  the  Fidelity  Company  would 
not  have  made  the  bond  if  it  had  been  aware  of  the  insolvency, 
have  estopped  the  bondholders  from  enforcing  the  superiority  of 
their  mortgage  lien.  If  their  lien  had  been  a  secret  one,  there 
might  have  been  some  basis  for  a  claim  of  an  estoppel;  but  their 
mortgage  was  of  record,  and  had  been  of  record  for  about  10  years, 
and  that  record,  under  the  law  which  made  it  a  public  record,  was 
a  flaming  signal  of  danger  that  charged  the  Fidelity  Company  and 
all  others  dealing  with  the  Railway  Company  with  full  knowledge 
of  the  terms  and  legal  effect  of  the  mortgage  and  of  the  bonds  it 
secured.  After  the  bondholders  had  recorded  their  mortgage  no 
duty  rested  upon  them  to  notify  the  Fidelity  Company,  or  any 
other  party  dealing  with  the  Railway  Company,  of  any  default  in 
the  payment  of  their  bonds  or  coupons,  or  of  any  insolvency  or 
solvency  of  the  Railway  Company.  They  had  secured  themselves 
against  the  risk  of  the  insolvency  of  the  Company  by  their  mort- 
gage, and  by  its  record  they  had  given  all  men  legal  notice  of  that 
fact,  and  of  the  further  fact  that  every  party  who  thereafter  dealt 
with  the  compan}^  took  its  own  risk  of  the  insolvency  of  that  com- 
pany and  of  its  inability  to  pay  any  debt  or  discharge  any  obliga- 
tion it  contracted  in  the  face  of  the  record  notice  of  the  prior  and 
superior  lien  of  the  mortgage.  The  bondholders  were  not  estopped 
from  enforcing  their  superior  lien  by  the  facts  or  the  alleged  facts 
of  this  case. 

It  is  next  insisted  that  the  Fidelity  Company  is  entitled  in 
equity  to  a  preference  over  the  holders  of  the  bonds,  because  its 
bond  preserved  and  enhanced  the  value  of  tlie  property  to  the  bond- 
holders secured  by  the  mortgage.  But  the  fact  that  liabilities  or 
guaranties  incurred,  money  or  materials  furnished,  or  work  done 
at  the  request  of  the  mortgagor  preserve  the  mortgaged  property 
and  enhance  the  security  of  the  mortgagees,  is  no  ground  for  dis- 


666  PRIORITIES 

placing  the  prior  lien  of  the  mortgagees  for  the  reason  that  the 
record  of  the  mortgage  is  plenary  notice  that  such  acts  will  ordi- 
narily and  naturally  have  that  effect,  and  will  subject  the  enhanced 
value  to  the  superior  lien  of  the  recorded  mortgage.  Dunham  v. 
Railwaij  Compamj,  1  Wall.  254,  267,  17  L.  Ed.  584;  Railroad  Co.  v. 
Cowdrey,  11  Wall.  459,  464,  481,  482,  20  L.  Ed.  199;  Railway  Co. 
V.  Hamilton,  134  U.  S.  296,  301,  10  Sup.  Ct.  546,  33  L.  Ed.  905; 
Porter  v.  Pittsburgh  Bessemer  Steel  Co.,  120  U.  S.  649,  671,  7  Sup. 
Ct.  1206,  30  L.  Ed.  830;  Thompson  v.  Valley  R.  R.  Co.,  132  U.  S. 
68,  73,  74,  10  Sup.  Ct.  29,  33  L.  Ed.  256;  Morgan's  Co.  v.  Texas 
Central  Ry.,  137  U.  S.  171,  195,  11  Sup.  Ct.  61,  34  L.  Ed.  625; 
Southern  Railways.  Carnegie  Steel  Co.,  176  U.  S.  257,  259,  296,  20 
Sup.  Ct.  347,  44  L.  Ed.  458;  Lackawanna,  etc.,  Co.  v.  Farmers' 
Loan  &  Trust  Co.,  176  U.  S.  298,  315,  316,  20  Sup.  Ct.  363,  40 
L.  Ed.  475;  Illinois  Trust  &  Sav.  Bank  v.  Doud,  105  Fed.  123,  124, 
136,  44  C.  C.  A.  389,  390,  402,  52  L.  R.  A.  A^l;  International  Trust 
Co.  V.  T.  B.  Townsend,  etc.,  Co.,  95  Fed.  850,  863,  37  C.  C.  A.  396, 
409.  The  dominant  rule  that  runs  through  and  controls  this  case, 
and  all  other  cases  upon  this  subject,  is  thus  stated  by  the  Supreme 
Court  in  Dunham  v.  Railway  Company,  1  Wall.  254,  267,  17  L.  Ed. 
584: 

"Contractor,  under  the  circumstances,  could  acquire  no  greater 
interest  in  the  road  than  was  held  by  the  company.  He  did  not 
exact  any  formal  conveyance;  but,  if  he  had,  and  one  had  been 
executed  and  delivered,  the  rule  would  be  the  same.  Registry 
of  the  first  mortgage  was  notice  to  all  the  world  of  the  lien  of  the 
complainant,  and  in  that  point  of  view  the  case  does  not  even  show 
a  hardship  upon  the  contractor,  as  he  must  have  known,  when 
he  accepted  the  agreement,  that  he  took  the  road  subject  to  the 
rights  of  the  bondholders.  Acting,  as  he  did,  with  a  full  knowledge 
of  all  the  circumstances,  he  has  no  right  to  complain  if  his  agree- 
ment is  less  remunerative  than  it  would  have  been  if  the  bondholders 
had  joined  with  the  company  in  making  the  contract.  No  effort  ap- 
pears to  have  been  made  to  induce  them  to  become  a  party  to  the 
agreement,  and  it  is  now  too  late  to  remedy  the  oversight." 

Finally  counsel  argued  that  the  fact  that  the  Fidelity  Company 
gave  a  supersedeas  bond  and  thereby  prevented  Madison  from 
levying  an  execution  on  the  property  of  the  Railway  Company, 
and  thereby  interrupting  the  running  of  the  railroad,  entitles  it  to 
an  equitable  preference  over  the  bondholders  secured  by  the  prior 
mortgage,  and  in  support  of  this  position  a  consideration  of  these 
authorities  is  invoked.    Union  Trust  Co.  v.  Morrison,  125  U.  S.  591, 


U.  S.  FIDELITY  &  GUARANTY  CO.  V.  U.  S.  &  MEXICAN  TRUST  CO.      66.7 

8  Sup.  Ct.  1004,  31  L.  Ed.  825;  Far7ners'  Loan  &  Trust  Co.  v. 
Northern  Pacific  R.  Co.  (C.  C),  71  Fed.  245;  Jones  v.  Central  Trust 
Co.,  73  Fed.  568,  571,  19  C.  C.  A.  569;  City  Trust  Co.  v.  Sedalia 
Light  &  Traction  Co.  (D.  C),  195  Fed.  845,  849.    An  examination 
of  these  cases  discloses  little  support  for  the  position  of  the  appel- 
lant.    The  opinion  and  decision  in  City  Trust  Co.  v.  Sedalia  Light 
&  Traction  Co.  (D.  C),  195  Fed.  845,  849,  sustains  that  position. 
But  that  opinion  and  decision  was  rendered  by  Judge  Pollock, 
the  same  judge  whose  decision  in  the  case  in  hand  that  the  surety 
on  this  supersedeas  bond  is  not  entitled  to  an  equitable  preference 
over  the  bondholders  secured  by  the  mortgage  is  now  in  issue,  and 
his  opinion  in  the  case  in  195  Fed.  845,  was  contrary  to  the  opinion 
of  Judge  Brewer,  afterwards  Mr.  Justice  Brewer  of  the  Supreme 
Court,  in  Blair,  Trustee,  v.  St.  Louis,  H.  &  K.  R.  Co.  (C.  C),  23  Fed. 
523,  which  was  rendered  in  1885  and  has  been  the  prevailing  rule 
in  this  circuit  from  that  time  to  the  present.     As  Judge  Pollock 
has  come  to  a  different  conclusion  in  the  case  before  us,  his  decision 
in  195  Fed.  845,  is  entitled  to  no  farther  consideration.     All  the 
other  authorities  quoted  above  were  rendered  before  that  long 
and  notable  line  of  decisions  of  the  Supreme  Court  commencing 
with  Kneeland  v.  American  Loan  Co.,  136  U.  S.  89,  98,  10  Sup.  Ct. 
950,  34  L.  Ed.  379,  and  including  Morgan's  L.  &  T.  R.  Co.  v.  Texas 
Central  Ry.  Co.,  137  U.  S.  171,  196,  198,  11  Sup.  Ct.  61,  34  L.  Ed. 
625;  Thompson  v.  Valley  R.  Co.,  132  U.  S.  68,  71,  73,  10  Sup.  Ct. 
29,  33  L.  Ed.  256;  Thomas  v.  Western  Car  Co.,  149  U.  S.  95,  110, 
13  Sup.  Ct.  824,  37  L.  Ed.  663;  Southern  Railway  Co.  v.  Carnegie 
Steel  Co.,  176  U.  S.  257,  296,  20  Sup.  Ct.  347,  44  L.  Ed.  458;  Lacka- 
wanna Iron  &  Coal  Co.  v.  Farmers'  Loan  &  Trust  Co.,  176  U.  S. 
298,  315,  20  Sup.  Ct.  363,  40  L.  Ed.  475,  and  later  cases  of  the  same 
nature,  narrowed  and  limited  the  class  of  cases  entitled  to  an  equi- 
table preference  over  prior  mortgages  to  those  incurred  for  the 
necessary  current  expenses  of  the  operation  of  the  mortgaged  prop- 
erty in  the  ordinary  course  of  business  within  a  limited   time 
anterior  to  the  impounding  of  the  property  by  the  receiver  for  the 
benefit  of  the  mortgagees.    The  influence  and  authority  of  these 
earlier  decisions  is  far  less  than  those  of  the  modern  opinions  which 
conform  to  the  rule  established  by  the  later  authorities  from  the 
Supreme  Court. 

The  opinion  and  decision  in  Union  Trust  Company  v.  Morrison, 
125  U.  S.  591,  8  Sup.  Ct.  1004,  31  L.  Ed.  825,  when  carefully  read, 
fails,  as  was  demonstrated  by  Judge  Lurton,  afterwards  Mr. 
Justice  Lurton  of  the  Supreme  Court,  in  Whiteley  v.  Central  Trust 


068  PRIORITIES 

Co.,  76  Fed.  74,  77,  22  C.  C.  A.  67,  34  L.  R.  A.  303,  to  sustain  the 
proposition  that  a  surety  who,  at  the  request  of  the  mortgagor, 
signs  a  supersedeas  or  other  bond  in  rehance  upon  the  solvency  of 
the  mortgagor,  and  in  the  belief  and  expectation  that  it  will  pay 
any  loss  the  surety  sustains  out  of  its  income  or  property,  is  entitled 
to  any  preference  in  equity  over  the  bonds  secured  by  the  prior 
mortgage.  It  was  not  based  upon  that  proposition  but  was  founded 
on  special  equities  which  do  not  exist  in  this  case,  or  in  any  ordinary 
case  involving  an  alleged  perferential  equity  of  a  surety  upon  a 
supersedeas  bond. 

Nor  does  the  decision  and  opinion  of  the  court  in  Jones  v.  Central 
Trust  Company,  73  Fed.  568,  19  C.  C.  A.  569,  sustain  the  conten- 
tion of  the  surety.  In  that  case  an  attachment  had  been  levied, 
upon  some  mortgaged  property.  Thereupon  the  trustee  in  the 
mortgages  caused  the  property  to  be  replevied,  and  brought  the 
sureties  to  sign  the  replevin  bonds.  Because  the  trustee  induced 
and  caused  the  sureties  to  make  the  bonds,  the  court  held  that  the 
sureties  were  entitled  to  an  equitable  preference  over  the  trustee 
and  over  the  bondholders  he  represented  in  payment  out  of  the 
mortgaged  property.  The  case  rests  upon  the  fact  that  the  trustee 
for  the  bondholders  induced  the  sureties  to  sign.  73  Fed.  571, 
573,  19  C.  C.  A.  569.  Neither  the  trustee  nor  any  of  the  bondhold- 
ers solicited  or  caused  the  Fidelity  Company  to  sign  the  bond  in 
the  case  at  bar. 

Of  the  cases  cited  by  counsel  for  the  surety  there  remains 
Farmers'  Loan  &  Trust  Co.  v.  Northern  Pacific  R.  Co.  (C.  C),  71 
Fed.  245.  In  that  case  Griggs  and  Foster  had  signed  a  supersedeas 
])ond  to  stay  the  execution  of  a  judgment  against  the  Northern 
Pacific  Railroad  Company  for  a  personal  injury.  The  appeal  was 
dismissed,  and  the  judgment  became  final,  after  receivers  of  the 
property  of  the  Railroad  Company  had  been  appointed.  At  that 
time  there  was  a  rivalry  between  the  judge  of  the  Eastern  district 
of  Wisconsin,  the  court  of  original  jurisdiction,  and  the  judge  of 
the  district  of  Washington,  one  of  the  courts  of  ancillary  juris- 
diction, over  the  administration  of  the  property  of  this  railroad. 
Judge  Caldwell  had  delivered  his  opinion  in  Farmers'  Loan  & 
Trust  Co.  V.  Kansas  City,  W.  N.  W.  Ry.  Co.  (C.  C),  53  Fed.  182,  in 
which  he  had  in  effect  held  that  any  meritorious  claims  of  unse- 
cured creditors  might,  in  the  discretion  of  the  judge  administeiing 
the  property,  be  given  a  preference  in  payment  out  of  the  income, 
or  out  of  the  proceeds,  of  mortgaged  property  over  the  claims  of 
bondholderssecured  by  a  prior  mortgage.     The  Supreme  Court, 


r.  S.  FIDELITY  &  GUARANTY  CO.  V.  U.  S.  &  MEXICAN  TRUST  CO.      669 

not  without  knowledge  of  that  opinion,  had  expressly  held,  and 
rather  sternly  insisted  upon,  the  established  contrary  rule  in  Knee- 
Innd  V.  American  Loan  Co.,  136  U.  S.  89,  97,  10  Sup.  Ct.  950,  953 
(34  L.  Ed.  379),  and  had  said: 

"The  appointment  of  a  receiver  vests  in  the  court  no  absolute 
control  over  the  propert}^  and  no  general  authority  to  rlisplace 
vested  contract  liens.  Because  in  a  few  specified  and  limited  cases 
this  court  has  declared  that  unsecured  claims  were  entitled  to 
priority  over  mortgage  debts,  an  idea  seems  to  have  obtained  that 
a  court  appointing  a  receiver  acquires  power  to  give  such  preference 
to  any  general  and  unsecured  claims.  It  has  been  assumed  that  a 
court  appointing  a  receiver  could  rightfully  burden  the  mortgaged 
property  for  the  payment  of  any  unsecured  indebtedness.  Indeed, 
we  are  advised  that  some  courts  have  made  the  appointment  of  a 
receiver  conditional  upon  the  payment  of  all  unsecured  indebted- 
ness in  preference  to  the  mortgage  liens  sought  to  be  enforced. 
Can  anything  be  conceived  which  more  thoroughly  destroys  the 
sacredness  of  contract  obligations?  One  holding  a  mortgage  debt 
upon  a  railroad  has  the  same  right  to  demand  and  expect  of  the 
court  respect  for  his  vested  and  contracted  priority  as  the  holder  of 
a  mortgage  on  a  farm  or  lot.  So,  when  the  court  appoints  a  re- 
ceiver of  railroad  property,  it  has  no  right  to  make  that  receivership 
conditional  on  the  payment  of  other  than  those  few  unsecured 
claims  which,  by  the  rulings  of  this  court,  have  been  declared  to 
have  an  equitable  priority.  No  one  is  bound  to  sell  to  a  railroad 
company  or  to  work  for  it,  and  whoever  has  dealings  with  a  com- 
pany whose  property  is  mortgaged  must  be  assumed  to  have  dealt 
with  it  on  the  faith  of  its  personal  responsibility,  and  not  in  expec- 
tation of  subsequently  displacing  the  priority  of  the  mortgage 
liens.  It  is  the  exception,  and  not  the  rule,  that  such  priority  of 
liens  can  be  displaced.  We  emphasize  this  fact  of  the  sacredness 
of  contract  liens,  for  the  reason  that  there  seems  to  be  growing  an 
idea  that  the  chancellor,  in  the  exercise  of  his  equitable  powers, 
has  unlimited  discretion  in  this  matter  of  the  displacement  of 
vested  liens." 

In  this  state  of  the  decisions  the  receivers  applied  to  Judge 
Jenkins  in  the  Wisconsin  district  for  authority  to  pay  the  claim 
against  the  sureties  on  the  supersedeas  bond  out  of  the  income  of 
the  property  in  their  hands  in  preference  to  the  claims  of  the  mort- 
gage bondholders.  Judge  Jenkins  reviewed  the  decision  of  Judge 
Caldwell  and  that  of  the  Supreme  Court  in  Kneeland  v.  Loan  Co., 
136  U.  S.  97,  10  Sup.  Ct.  950,  34  L.  Ed.  379,  held  that  the  decision 


670  PRIQRITIES 

of  Judge  Caldwell  was  "in  direct  antagonism  to  the  rulings  of  the 
Supreme  Court,"  that  he  could  not  follow  it,  and  denied  the 
petition  of  the  receivers.  Farmers'  Loan  &  Trust  Co.  v.  Northern 
Pac.  R.  Co.  (C.  C),  68  Fed.  36,  39.  Thereupon  the  sureties,  Griggs 
and  Foster,  applied  to  the  District  Court  of  Washington  in  the 
same  foreclosure  suit,  for  preferential  payment  of  the  same  claim, 
and  Judge  Hanford,  although  he  was  aware  of  Judge  Jenkins' 
decision  to  the  contrary  (71  Fed.  246),  referred  to  Judge  Caldwell's 
opinion  in  53  Fed.  182,  196,  said: 

'  "It  is  my  opinion  that  Judge  Caldwell's  opinion  in  that  case  is 
sound,  and  that  the  principles  therein  enunciated  must  prevail  as 
the  law  of  this  country,  and  I  have  no  hesitation  in  following  that 
case  in  this  instance."  Farmers'  Loan  &  Trust  Co.  v.  Northern. 
Pac.  R.  Co.  (C.  C),  71  Fed.  245,  246,  248. 

On  the  authority  of  Judge  Caldwell's  decision  he  gave  the  claim 
of  the  sureties  a  preference  in  payment  over  the  claims  of  the 
mortgage  bondholders,  notwithstanding  the  decisions  of  the  Su- 
preme Court.  This  decision  of  Judge  Hanford  is  the  only  decision 
cited  by  counsel  for  the  Fidelity  Company  which  is  in  point  upon 
the  issue  in  the  case  in  hand.  It  lacks  the  support  of  reason  and  of 
authority,  and  the  argument  in  it  is  not  persuasive. 

There  is  no  equity  in  the  claim  of  this  surety  to  be  preferred  in 
payment  out  of  the  mortgaged  property  to  the  holders  of  the  bonds. 
The  mortgage  was  made  and  recorded  a  decade  before  the  surety 
signed  its  bond.  That  mortgage  was  made  and  recorded  for  the 
express  purpose  of  giving  to  the  bondholders  secured  thereby  a 
first  lien  upon  the  mortgaged  property  and  a  preference  in  payment 
out  of  the  income  and  out  of  the  proceeds  of  the  property  mort- 
gaged. Such  a  preference  was  secured  by  the  express  terms  of  the 
contract  made  between  the  mortgagor,  the  trustee  and  the  bond- 
holders. Probably  some  of  the  bonds  had  been  repeatedly  sold 
between  the  time  when  they  were  issued  and  the  date  when  the 
supersedeas  bond  was  given.  The  purchasers  bought  them  in  re- 
liance upon  the  first  lien  upon  the  property  of  the  railway  company 
evidenced  by  the  recorded  mortgage.  They  had  no  notice  or 
knowledge  that  the  Fidelity  Company  was  acquiring  or  seeking  to 
acquire  a  lien  superior  to  their  own.  The  Fidelity  Company  gave 
them  no  notice  of  its  attempt  so  to  do,  and  no  opportunity  to  pro- 
tect or  defend  themselves  against  it  until,  if  its  preferential  lien 
exists  at  all,  it  has  become  perfect.  On  the  other  hand,  the  Fidelity 
Company,  before  and  at  the  time  it  assumed  its  liability,  had  full 
knowledge  by  the  record  of  the  mortgage,  first,  that  the  bond- 


U.  S.  FIDELITY  &  GUARANTY  CO.  l\  U.  S.  &  MEXICAN  TRUST  CO.       671 

holders  had  a  first  hen  upon  the  mortgaged  property;  second,  that 
the  only  parties  that  could  waive  that  lien,  or  make  a  lawful 
contract  to  give  another  superior  to  it,  were  the  trustee  and  the 
bondholders,  and  that  the  mortgagor  was  powerless  to  do  so. 
Notwithstanding  this  knowledge  the  Fidelity  Compan}'  neither 
sought  nor  secured  any  contract  from  the  trustee  or  the  bondhold- 
ers. In  the  face  of  all  this  knowledge,  it  voluntarily  signed  the 
supersedeas  bond  and  assumed  its  liability  in  reliance  upon  and  at 
the  risk  of  the  ability  of  the  mortgagor  to  protect  and  indemnify  it, 
and  it  cannot  now  successfully  appeal  to  a  court  of  equity  to  throw 
that  risk  and  the  burden  thereof  upon  the  mortgage  bondholders. 
Its  equity  is  far  inferior  to  theirs. 

The  contention  that  by  means  of  the  bontl  property  was  pre- 
served, and  the  assets  that  came  to  the  hands  of  the  bondholders 
were  increased  by  the  amount  of  the  judgment  which  the  bond 
prevented  the  judgment  creditor  from  collecting,  is  fallacious. 
The  judgment  was  inferior  in  lien  to  the  mortgage,  and  nothing 
which  was  subject  to  the  mortgage  could  have  })een  taken  from  the 
bondholders  by  a  levy  and  sale  under  the  judgment.  If  the  execu- 
tion would  have  been  levied  upon  property  upon  which  the  bond- 
holders had  no  lien,  the  taking  of  that  property  would  not  have 
diminished  their  security,  and  if  it  would  have  been  levied  upon 
property  subject  to  their  lien,  their  mortgage  would  have  held 
that  property.  And  even  if  it  were  true  that  the  surety,  by  its 
bond  to  pay  the  judgment,  preserved  security  or  property  which 
subsequently  came  to  the  bondholders,  and  which  they  otherwise 
would  have  lost,  that  fact  would  not  give  the  surety  a  preferential 
equity  over  the  bondholders.  If  it  would,  then  every  unsecured 
creditor,  whose  monej^s,  labor,  material,  or  guaranty  aided  to  pre- 
serve or  enhance  the  value  of  the  mortgaged  property,  might,  by 
delaying  collection  of  the  mortgagor's  debts,  secure  an  equitable 
lien  superior  to  that  of  the  mortgage,  and  every  creditor,  whose 
claim,  like  that  of  Madison  here,  neither  preserved  nor  enhanced 
the  value  of  the  mortgaged  property,  could  give  that  claim  a  pref- 
erential lien  by  hiring  some  surety  company  for  a  small  percen- 
tage of  his  claim  to  guarantee  its  payment.  If  the  argument  of 
counsel  for  the  Fidelity  Company  could  be  sustained,  its  practical 
effect  would  be  to  strike  down  the  security  of  every  railroad  mort- 
gage, and  to  give  to  unsecured  creditors  liens  superior  to  those  of 
the  creditors  who  by  mortgage  bonds,  in  reliance  upon  recorded 
mortgages,  secure  their  payment.  The  law  and  equity,  the  written 
contract  evidenced  by  the  mortgage  and  its  record,  and  the  rela- 


672  PRIORITIES 

tive  equities  of  the  parties,  cry  out  alike  against  the  payment 
out  of  the  income  or  the  proceeds  of  the  mortgaged  property  of  the 
claim  of  a  surety  on  a  bond  of  a  mortgagor  in  preference  to  the 
claims  of  bondholders  secured  by  a  prior  mortgage.  A  mortgagor 
and  his  sureties  cannot,  by  making  a  contract  or  bond  with  an  un- 
secured creditor  to  pay  the  mortgagor's  debt  to  him,  transform  his 
unsecured  claim  into  a  claim  secured  by  a  lien  superior  to  that  of 
bondholders  secured  by  a  prior  recorded  lien,  and  so  are  the  au- 
thorities. Blair  v.  St.  Louis,  etc.,  Ry.  Co.  (C.  C),  23  Fed.  523; 
Farmers'  Loan  &  Trust  Co.  v.  Northern  Pacific  R.  Co.  (C.  C),  68 
Fed.  36,  39;  Whiteley  v.  Central  Trust  Co.,  76  Fed.  74,  77,  78,  22 
C.  C.  A.  67,  34  L.  R.  A.  303;  Central  Trust  Co.  v.  Third  Ave.  Ry. 
Co.,  180  Fed.  710,  711,  103  C.  C.  A.  492;  Pennsylvania  Steel  Co.  v. 
New  York  City  Ry.  Co.  (C.  C),  165  Fed.  485;  Gay  v.  Hudson  River 
Elec.  Power  Co.  (C.  C),  182  Fed.  904,  909. 
The  decree  below  is  affirmed.^ 

•  Cf.  Fosdick  V.  Schall,  99  U.  S.  235       107  U.  S.  591  (1883).    See  also,  note, 
(1878);  Union  Trust  Co.  v.  Souther,       17  Col.  Law  Rev.  69  (1917). 


CHAPTER  VII 

SPECIAL  EQUITIES  COUPLED  WITH  THE  MORTGAGE 
RELATION:  HEREIN  OF  MARSHALLING 


McBRIDE  V.  POTTER-LOVELL  CO. 

Supreme  Judicial  Court  of  Massachusetts,  1897 

(169  Mass.  7) 

Bill  in  Equity,  filed  September  4,  1890,  against  the  Potter- 
Lovell  Compan}^,  the  Second  National  Bank  of  Boston,  and,  by 
amendment,  against  John  Brooks  and  George  S.  Bullens,  assignees 
in  insolvency  of  the  Potter-Lovell  Company,  and  against  the 
North  Star  Boot  and  Shoe  Company,  and  divers  other  defendants, 
makers  of  certain  promissory  notes,  which,  with  promissory  notes 
made  by  the  plaintiffs,  the  bill  alleged,  had  been  fraudulently 
pledged  by  the  Potter-Lovell  Company  as  security  for  its  own 
debt  to  the  Second  National  Bank  of  Boston.  The  prayer  of  the 
bill  was  that  the  assets  might  be  marshalled;  that  each  of  the 
makers  of  the  notes  named  as  defendants  should  be  directed  to 
contribute  his  equitable  share  to  the  payment  of  the  indebtedness 
of  the  Potter-Lovell  Company  to  the  Second  National  Bank;  for 
the  appointment  of  a  receiver;  for  an  injunction;  and  for  other 
relief. 

The  case  was  heard  on  the  pleadings,  the  report  of  a  master, 
and  an  agreed  statement  of  facts  by  Barker,  J,,  who  reserved  it 
for  the  consideration  of  the  full  court. 

Allen,  J.  The  Potter-Lovell  Company,  a  corporation,  hekl 
certain  notes  of  the  plaintiffs  for  sale,  and  it  was  to  remit  to  them 
the  proceeds,  less  its  commissions  for  selling  the  same.  The  Potter- 
Lovell  Company  also  held  notes  of  others  of  the  defendants,  which 
it  had  received  from  them  for  sale.  Instead  of  selling  the  above 
mentioned  notes  for  the  benefit  of  the  several  makers,  the  com- 
pany at  different  times  wrongfully  and  fraudulently  pledged  all 
of  them  to  the  Second  National  Bank  as  security  for  its  own  debts 
to  said  bank,  all  the  notes  being  pledged  for  the  same  debts.    The 

673 


674      SPECIAL  EQriTIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

]iank,  being  a  bona  fide  holder  for  value,  without  notice,  collected 
enough  of  these  notes  from  time  to  time  as  they  fell  due,  includ- 
ing the  notes  of  the  plaintiff  and  some  others,  to  satisfy  its  claims 
against  the  Potter-Lovell  Company.  All  of  the  various  parties 
whose  notes  were  thus  fraudulently  pledged  stood  on  the  same 
footing,  except  that  the  notes  were  pledged  at  different  times,  and 
fell  due  and  were  collected  at  different  times;  and  except  that 
one  of  the  parties,  the  North  Star  Boot  and  Shoe  Company,  de- 
manded the  return  of  its  note  from  the  Potter-Lovell  Company 
before  the  same  was  pledged,  and  has  never  paid  the  same  in  whole 
or  in  part  to  the  bank. 

These  differences  do  not  vary  the  equitable  rights  and  liabilities 
of  the  parties  as  amongst  themselves.  The  liability  to  contribute 
does  not  depend  on  a  contract  between  the  parties  who  are  held 
liable  to  contribute,  and  is  not  affected  by  the  fact  that  notes  were 
pledged  and  fell  due  and  were  paid  at  different  times,  or  that  some 
of  them  were  paid  only  in  part,  or  not  at  all.  The  notes  were 
pledged  to  secure  the  same  indebtedness.  The  fact  that  some  of 
them  fell  due  at  earlier  dates  than  others  creates  no  equity  in 
favor  of  those  which  fell  due  last.  See  American  Loan  &  Trust 
Co.  V.  Northwestern  Guaranty  Loan  Co.,  166  Mass.  337.  The 
various  parties  selected  a  common  agent,  and  this  agent  used  its 
power  to  place  them  all  under  a  common  liability,  thus  virtually 
making  them  all  sureties  for  itself.  It  might  be  that  under  such 
circumstances  the  pledgee  would  prefer  to  hold  one  and  exonerate 
another,  and  it  would  have  power  to  do  so  in  the  first  instance  by 
proceeding  to  collect  of  one,  but  not  of  another.  But  where  several 
different  parties  have  thus  been  exposed  to  loss  by  the  fraud  of 
their  common  agent,  it  is  more  equitable  that  the  burden  of  the 
loss  should  be  shared  pro  rata.  Under  such  circumstances  equality 
is  equity,  without  respect  to  the  time  of  the  maturity  of  the  notes. 
The  demand  by  the  North  Star  Boot  and  Shoe  Company  for  the 
return  of  its  note  was  also  immaterial.  It  was  no  more  fraudulent 
to  pledge  this  note  after  such  demand  than  it  would  have  been  to 
pledge  it  before  a  demand.  All  the  notes  being  pledged  as  security 
for  the  same  indebtedness,  the  whole  loss  in  consequence  thereof 
is  to  be  borne  by  all  the  makers  in  proportion  to  the  amounts  of 
the  notes  so  pledged.  Gould  v.  Central  Trust  Co.,  6  Abb.  N.  C. 
381;  New  England  Trust  Co.  v.  New  York  Belting  &  Packing  Co., 
166  Mass.  42,  and  cases  there  cited;  Wiggin  v.  Suffolk  Ins.  Co., 
18  Pick.  145,  153;  Warner  v.  Morrison,  3  Allen,  566;  1  Story,. 
Eq.  Jur.,  §  493. 


THE    OLIVIA    A.    CARRIGAN  675 

The  assignees  in  insolvency  of  the  Potter-Lovell  Company  have 
no  interest  in  the  case.  They  have  no  claim  arising  upon  any  of 
these  notes,  and  no  duty  in  respect  to  the  settlement  of  the  ques- 
tions involved  in  this  suit. 

Decree  for  the  plaintiffs. 


AGUILAR  V.  AGUILAR 

Court  of  the  Vice  Chancellor,  1820 

(5  Haddock's  Ch.  414) 

The  Plaintiff,  who  was  the  Wife  of  the  Defendant  Aguilar, 
having  Property  to  her  separate  use,  joined  her  Husband  in  a 
Grant  of  an  Annuity,  and  the  Grant  comprised  as  well  the  separate 
Property  of  the  Wife,  as  Property  given  to  the  Wife  for  Life,  not 
to  her  separate  use,  and  to  which  therefore  her  Husband  was 
entitled  jure  mariti. 

The  Wife  joined  with  the  Husband  in  granting  other  Securities, 
which  were  charged  upon  her  separate  property  alone.  The  Hus- 
band afterwards  took  the  benefit  of  an  Insolvent  Debtor's  Act, 
and  his  Debts  being  considered  of  small  amount,  he  subsequently 
granted  two  Annuities  charged  on  the  Wife's  Life  Interest,  to 
which  he  was  entitled  jure  mariti. 

The  Vice  Chancellor  held,  first,  that  the  Wife,  being  a  Surety 
only  in  the  Grant  of  Annuity,  which  comprised  her  Husband's 
Property  as  well  as  her  own,  was  entitled  as  between  her  and  her 
Husband,  and  the  Assignee  under  the  Insolvent  Debtor's  Act, 
and  subsequent  Annuitants,  to  have  the  Husband's  income  first 
applied  in  satisfaction  of  the  Annuity.^ 


THE  OLIVIA  A.  CARRIGAN 

U.  S.  District  Court,  S.  D.  New  York,  1881 

(7  Fed.  507) 

In  Admiralty. 

Choate,  D.  J.  The  brig  Olivia  A.  Carrigan,  belonging  to 
Halifax,  Nova  Scotia,  together  with  the  freight  moneys  due  on 
her  voyage  to  this  port,  were  attached  in  a  suit  in  this  court  for 

'  Remainder  of  opinion  omitted. 


676      SPECIAL   EQUITIES   COUPLED    WITH   THE   MORTGAGE   RELATION* 

seamen's  wages,  brought  by  the  Hbellants,  McNamara  and  others. 
After  the  service  of  the  monition  by  the  marshal  on  the  parties 
owing  the  freight  moneys,  the  sheriff  of  the  county  of  New  York 
served  on  them  a  warrant  of  attachment  against  the  same  freight 
moneys  in  their  hands,  issued  out  of  the  supreme  court  of  New 
York  at  the  suit  of  the  petitioner  Bertaux  against  the  owner  of 
the  vessel.  The  vessel  was  condemned  and  sold  under  the  decree 
of  this  court,  and  another  libel  was  filed  for  supplies  and  materials. 
In  the  seamen's  suit  a  decree  was  entered  condemning  the  vessel 
and  her  freight  for  payment  of  the  seamen's  wages,  and  a  final 
decree  directed  the  payment  of  the  freight  to  the  satisfaction  of 
the  claim  of  the  seamen,  and  that  any  balance  due  to  the  seamen, 
not  paid  by  application  of  the  freight,  be  paid  out  of  the  proceeds 
of  the  vessel.  Before  the  execution  of  this  decree  in  respect  to  the 
freight  moneys,  and  before  the  freight  had  been  paid  into  court, 
the  petitioner  Bertaux  applied  to  the  court  for  a  modification  of 
the  decree  so  that  the  wages  should  be  paid  out  of  the  proceeds 
of  the  vessel,  leaving  the  freight  moneys  to  satisfy  his  judgment, 
if  he  should  recover  judgment  in  his  suit  in  the  state  court.  This 
motion  was  opposed  by  the  petitioner  Dimock,  who  had  filed  his 
petition  claiming  the  remnants  and  proceeds  of  the  vessel  under  a 
mortgage  from  one  Doyle,  who  was  claimed  to  be  the  owner  of 
the  brig  at  the  date  of  his  mortgage,  and  by  Doyle,  who  claimed 
the  surplus,  if  any,  as  owner  at  the  time  of  the  sale  of  the  vessel. 
Bertaux's  application  was  by  motion,  on  an  affidavit;  and,  without 
determining  whether  he  obtained  any  lien  on  the  freight  moneys 
by  his  attachment  subsequent  to  that  of  the  marshal,  it  was  held 
that  the  proper  mode  of  presenting  his  claim,  if  any  he  had,  was 
by  petition,  and  not  by  motion,  and  it  was  ordered  that  he  have 
leave  to  file  a  petition,  and  in  the  meanwhile  it,  was  directed  that 
the  freight  moneys  be  paid  into  the  registry,  and  the  decree  in 
favor  of  the  seamen  be  satisfied  out  of  the  proceeds  of  the  vessel 
and  the  freight,  leaving  the  question  of  the  proper  marshalling  of 
the  assets  as  between  the  two  funds  to  be  determined  when  all 
the  parties  were  properly  before  the  court,  and  proof  should  have 
been  taken  under  the  several  petitions  filed  or  to  he  filed.  Bertaux 
has  now  come  in  by  petition,  and  by  a  supplemental  petition  it 
appears  that  he  has  recovered  a  judgment  for  $288.24.  The 
amount  of  the  freight  moneys  in  the  registry  is  $653;  the  proceeds 
of  the  vessel  remaining  in  the  registry,  after  satisfying  the  decree 
in  favor  of  the  seamen  and  all  other  decrees  for  maritime  liens, 
is  $597.18.     The  mortgage  of  the  petitioner  Dimock  is  dated 


THE    OLIVIA    A.    CARRIGAN  677 

April  26,  1880,  aud  there  is  alleged  to  be  due  upon  it  $2,000. 
Bertaux's  attachment  was  made  May  18,  1880.  And  now  a  mo- 
tion is  made  to  dismiss  his  petition  on  the  ground  that  he  cannot 
have  acquired  any  lien  on  the  freight  money  l)y  his  attachment 
which  this  court  can  recognize,  because  the  previous  attachment 
b}'  tlie  marshal  withdrew  the  debt  entirely  from  the  jurisdiction 
of  the  state  court,  and  on  the  ground  that  his  claim  upon  the  freight 
money,  if  any,  is  not  of  a  character  to  be  enforced  in  this  court 
against  a  surplus  in  the  registry.  The  parties  have  also  argued 
and  submitted  the  question  whether  the  lien  of  the  mortgage  or 
that  of  the  attaching  creditor,  if  they  both  have  liens,  should  be 
held  to  give  the  better  right  to  have  the  assets,  the  proceeds  of  the 
vessel  and  the  freight  money,  marshalled  for  his  benefit. 

The  remaining  question  is,  which  of  these  parties  has  the  better 
right  to  have  the  fund  marshalled  for  his  benefit?  ^  Courts  of 
admiralty  will,  in  proper  cases,  apply  the  equitable  rule,  that 
where  one  creditor  has  two  funds  to  resort  to  and  another  has  but 
one,  the  creditor  having  two  will  be  compelled  to  look  to  that 
fund  to  which  the  other  has  no  recourse.  This  has  been  applied 
in  case  of  seamen  who  have  an  equal  claim  on  ship  and  freight, 
and  to  whom  it  is  a  matter  of  indifference  out  of  which  they  are 
paid.  The  Sailor  Prince,  1  Ben.  234,  461;  and  see  In  re  Bank  of 
Nova  Scotia,  4  Fed.  Rep.  667.  In  this  case  the  mortgagee  insists 
that  the  sailors  be  paid  out  of  the  freight,  to  protect  his  claim 
against  the  vessel.  On  the  other  hand,  the  attaching  creditor 
insists  that  they  be  paid  out  of  the  ship,  to  protect  his  lien  upon 
the  freight.  In  the  case  last  cited,  where  a  mortgagee  of  the  vessel 
contested  a  similar  question  with  a  party  who  had  a  lien  on  the 
freight  by  way  of  security  for  advances,  it  was  held  that  their 
equities  were  equal,  and  it  was  directed  that  the  seamen  be  paid 
pro  rata  out  of  the  vessel  and  the  freight,  thus  giving  an  equal  pro- 
tection to  their  equal  equities.  In  that  case,  however,  each  of  the 
parties  had  an  equity  based  upon  what  was  in  fact  value  paid  for 
his  interest  or  lien  at  the  time  of  acquiring  it.  In  the  present  case, 
however,  the  attaching  creditor  has  parted  with  no  value  for  his 
interest  or  lien  Upon  the  freight.  He  got,  by  the  law  of  the  state, 
a  lien  on  the  interest  of  the  owner  in  the  freight  due.  He  acquired 
it,  as  it  seems  to  me,  subject  to  an  equity  then  existing  as  between 
the  mortgagee  of  the  vessel  and  the  owner,  which  the  owner  could 
not  then  have  resisted,  to  have  the  fund  marshalled  for  the  benefit 
of  the  mortgagee.  The  lien  of  the  mortgage  has  already  attached 
'  The  opinion  on  tliis  point  only  is  given. 


678      SPECIAL  EQUITIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

to  the  vessel,  and  the  Hen  for  wages  to  the  vessel  and  freight,  and 
the  fund  had  become  insufficient  to  pay  both  in  full.  Under  these 
circumstances,  the  attaching  creditor  who  takes  only  the  interest 
of  his  debtor  at  the  time  of  the  attachment,  not  by  purchase  or 
for  value,  but  merely  by  operation  of  law,  has  no  greater  equity 
against  the  mortgagee  than  his  debtor  himself  had.  Therefore, 
if  the  mortgagee  shall  show  the  mortgage  to  be  valid,  he  will  be 
entitled  to  have  the  seamen  paid  out  of  the  freight  so  far  as  it 
will  go,  notwithstanding  the  attachment.  The  freight  money  was 
paid  in  without  prejudice  to  the  rights  of  either  party,  and  the 
seamen's  wages  were  also  paid  without  prejudice  to  any  ultimate 
order  which  it  may  be  just  and  equitable  to  make;  but,  as  proof 
has  not  been  taken  under  either  petition,  an  order  of  reference  for 
that  purpose  must  be  made. 

Motion  to  dismiss  petition  denied.    Petitions  referred  to  take 
proof  of  facts,  etc. 


BEAVER  V.  SLANKER 

Supreme  Court  of  Illinois,  1879 

(94  III.  175) 

Writ  of  Error  to  the  Appellate  Court  of  the  Fourth  District. 

In  the  year  1866,  Victor  Buchanan,  as  administrator  de  bonis 
non  of  the  estate  of  John  C.  Riley,  deceased,  in  pursuance  of  an 
order  of  the  county  court  of  Lawrence  county,  sold  at  public  sale 
divers  tracts  of  lands  belonging  to  the  estate  of  said  Riley. 

Israel  A.  Powell  became  the  purchaser  for  the  price  of  $4,178. 
The  order  of  sale  made  by  the  county  court  required  notes,  with 
approved  personal  security  and  a  mortgage  on  the  lands  sold,  to  be 
given  to  secure  the  payment  of  the  purchase  money.  Powell 
accordingly,  on  July  14,  1866,  gave  to  Buchanan,  administrator,  his 
note  for  the  purchase  price  named,  with  Johnson  and  Abernathy 
as  sureties,  and  also  a  mortgage  on  the  lands  purchased,  to  secure 
the  payment  of  the  note,  the  mortgage  being  duly  recorded. 

In  April,  1869,  Buchanan,  administrator,  obtained  a  judgment 
in  the  circuit  court  of  Lawrence  county  on  the  note  for  a  remaining 
unpaid  portion  thereof,  against  Powell,  Johnson  and  Abernathy. 
Johnson  at  that  time  held  land  upon  which  the  judgment  became 
a  lien. 

The  judgment  was  made  upon  execution  out  of  Powell's  prop- 


BEAVER    V.    SLANKEK  679 

erty,  except  about  $500,  whicli  remained  unsatisfied  until  in  1873. 
In  1870  Johnson  sold  and  conveyed  his  land,  which  was  subject  to 
the  lien  of  this  judgment,  to  Gustave  Kleinworth,  bj^  deed,  with 
full  covenants  of  warranty.  In  1873  an  execution  issued  upon  the 
judgment  was  levied  upon  this  land  so  sold  by  Johnson  to  Klein- 
worth,  as  the  land  of  Johnson,  a  co-defendant  in  the  judgment, 
bound  by  the  lien  of  the  judgment,  and  the  land  was  sold  under 
the  execution  February  2,  1874,  to  D.  L.  Gold,  for  -S603.40,  and  the 
execution  was  returned  March  1,  1874,  as  satisfied  in  full  by  such 
sale.  Gold  was  the  administrator  of  the  estate  of  Henrietta  Riley, 
one  of  the  two  children  and  heirs  of  John  C.  Riley.  On  April  20, 
1869,  Buchanan,  administrator  of  John  C.  Riley,  in  settlement  of 
the  latter's  estate,  turned  over  and  assigned  to  Gold,  administrator 
of  the  estate  of  Henrietta  Riley,  the  unpaid  portion  of  said  judg- 
ment, and  at  the  same  time  assigned  to  Gold  the  mortgage  which 
had  been  given  by  Powell  to  Buchanan  at  the  administrator's  sale 
by  the  latter. 

In  January,  1875,  Kleinworth,  the  previous  purchaser  from 
Johnson  of  the  land  sold  under  the  execution,  bought  of  Gold  his 
certificate  of  purchase  of  the  land  under  the  execution,  paying  him 
therefor  $659,  and  Gold  assigned  to  Kleinworth  the  certificate  of 
purchase,  as  also  the  said  mortgage. 

The  bill  in  this  case  was  filed  by  Kleinworth,  asking  to  be  sub- 
rogated to  the  rights  of  Victor  Buchanan,  administrator,  as  the 
same  stood  before  the  said  sale  of  said  land  under  execution,  and 
for  the  foreclosure  of  the  aforesaid  mortgage.  Kleinworth  died 
during  the  progress  of  the  cause,  and  in  his  place  Gideon  Slanker, 
his  administrator,  was  substituted  as  a  party. 

Powell  had  made  sale  and  conveyance  of  the  several  tracts  of 
land  described  in  the  mortgage,  at  different  times  to  different 
purchasers,  Beaver  being  the  last,  on  May  2,  1868. 

The  circuit  court  decreed  in  favor  of  the  complainant  to  the 
extent  of  the  amount  he  paid  Gold  for  his  certificate  of  purchase 
of  complainant's  land,  and  that  the  mortgaged  lands  be  sold  for 
the  satisfaction  of  such  amount  in  the  inverse  order  of  their  aliena- 
tion by  Powell:  On  appeal  by  Beaver  to  the  Appellate  Court  for 
the  Fourth  District,  the  decree  was  affirmed,  and  Beaver  brings  the 
case  here  on  writ  of  error  to  the  Appellate  Court. 

Mr.  Justice  Sheldon  delivered  the  opinion  of  the  Court : 
As  a  mere  assignee  alone  of  the  mortgage,  the  complainant  might 
not  be  able  to  sustain  this  decree  in  his  favor,  as  the  judgment  for 


680      SPECIAL   EQUITIES   COUPLED   WITH   THE   MORTGAGE  RELATION 

the  mortgage  debt  was  satisfied  in  full  by  the  sale  under  execution 
of  Kleinworth's  land. 

But,  upon  the  doctrine  of  subrogation,  we  think  there  is  sufficient 
support  for  the  decree. 

It  is  the  undoubted  principle  of  equity,  that  if,  at  the  time  when 
the  obligation  of  the  principal  and  surety  is  given,  a  mortgage  also 
is  made  by  the  principal  to  the  creditor,  as  an  additional  security 
for  the  dei)t,  then,  if  the  surety  pays  the  debt,  he  will  be  entitled  to 
have  an  assignment  of  the  mortgage  and  to  stand  in  the  place  of  the 
mortgagee,  and  that  the  mortgage  will  remain  a  valid  and  effectual 
security  in  favor  of  the  surety  for  the  purpose  of  obtaining  his 
reimbursement,  notwithstanding  the  obligation  is  paid.  The 
mortgage  is  regarded  as  not  only  for  the  creditor's  security,  but  for 
the  surety's  indemnity  as  well.  1  Story  Eq.  Jur.  §  499;  Rogers  v. 
School  Trustees,  46  111.  428;  Phares  v.  Barhour,  49  id.  370;  Jacques  v. 
Fackney,  64  /f/.  87;  City  National  Bank  of  Ottawa  v.  Dudgeon,  65 
id.  12;  Bishop  v.  O'Conner,  69  id.  431. 

There  can  be  no  question,  in  the  case  of  Johnson  himself,  the 
surety,  had  the  land  been  sold  while  he  owned  it,  in  satisfaction  of 
the  judgment,  that  he  would  have  been  entitled  to  maintain  such  a 
bill  as  the  present.  The  only  doubt  is,  whether  the  principle  in 
question,  of  subrogation,  applies  in  favor  of  a  purchaser  of  the 
land  from  Johnson,  the  judgment  against  the  latter  being  a  lien 
upon  the  land  purchased.  We  are  of  opinion  it  does.  Klein  worth 
did  not  make  the  payment  which  he  did  for  the  certificate  of  pur- 
chase of  his  land,  as  a  mere  stranger  or  volunteer,  but  he  made  it 
standing  in  privity  with  Johnson,  the  surety,  as  his  assignee  of 
land  incumbered  with  the  lien  of  the  judgment  against  Johnson  as 
surety;  and  he  made  it  compulsorily,  to  save  to  himself  his  land 
which  had  been  sold  as  being  bound  by  this  judgment  lien.  In 
Hough  V.  .Ftna  Life  Insurance  Co.,  57  111.  318,  and  in  Young  v. 
Morgan,  89  id.  199,  this  court  recognized  the  doctrine  that  a  mere 
stranger  or  volunteer  could  not,  by  paying  a  debt  for  which  an- 
other is  bound,  be  subrogated  to  the  creditor's  rights  in  respect  to 
the  security  given  by  the  real  debtor;  but  that  if  the  person  who 
paid  the  debt  was  compelled  to  pay,  for  the  protection  of  his  own 
interests  and  rights,  then  the  substitution  should  be  made. 

Further,  the  present  proceeding  is  in  the  interest  of  the  surety, 
Johnson,  it  being  in  the  indirect  assertion  of  his  right  of  indemnity 
from  the  mortgaged  premises.  Johnson  sold  and  conveyed  to 
Kleinworth  with  covenant  of  warranty,  and  so  was  responsible  to 
the  latter  for  the  goodness  of  the  title.     Kleinworth,  instead  of 


BEAVER    r.    SLANKER  681 

ro^sorting  to  Johnson,  on  the  latter's  covenant  of  warrant}',  and 
leaving  Johnson  to  have  recourse  over  to  the  mortgage,  proceeds 
(hrectly  against  the  mortgaged  property,  which  is  ultimately  liable 
for  the  mortgage  debt,  and  in  obtaining  satisfaction  therefrom  for 
ihe  portion  of  the  mortgage  debt  the  sale  of  his  land  discharged, 
secures  full  indemnity  for  the  surety,  Johnson,  thus  avoiding  cir- 
cuity of  action. 

And  this  meets  the  suggestion,  that,  in  relief  of  the  appellant  and 
other  purchasers  from  Powell,  the  recourse  of  Kleinworth  should 
have  been  against  Johnson  on  his  covenant  of  warranty.  If  that 
had  been  done,  then  Johnson  himself  would  have  been  subrogated 
to  the  rights  under  the  mortgage,  so  that,  in  the  end,  the  result  to 
appellant  would  have  been  the  same — the  subjecting  of  the  mort- 
gaged premises.  There  is,  besides,  reason  to  believe  that  suit 
upon  the  covenant  of  warranty  would  have  been  unavailing. 
Johnson  has  deceased,  and  the  records  of  the  probate  court  show 
his  estate  to  be  insolvent.  To  be  sure,  this  showing  is  in  respect 
of  personalty  only,  and  there  is  a  possibility  of  the  decedent  having 
left  lands  which  might  respond  upon  the  covenant  of  warranty; 
nothing  appears  as  to  this. 

The  circumstance  of  Powell  having  sold  the  mortgaged  lands, 
and  they  now  being  in  the  hands  of  purchasers  from  him,  should 
make  no  difference.  Such  purchasers  occupy  no  better  position 
than  Powell  himself.  The  mortgage  was  upon  record,  and  they 
bought  with  notice  that  the  lands  were  mortgaged;  that  they  stood 
as  security  for  the  payment  of  this  mortgage  indebtedness,  and  as 
indemnity  to  the  sureties  against  its  payment,  and  that  they  were 
liable  to  be  resorted  to  and  sold  for  the  purpose  of  such  security  and 
indemnity. 

They  are  now  proceeded  against  but  for  such  purpose,  and  these 
purchasers  have  no  equitable  cause  of  complaint. 

If  it  be  regarded  important  that  they  should  have  had  notice 
that  Johnson  and  Abernathy  were  sureties  only,  we  think  they 
were  chargeable  with  such  notice. 

The  proceedings  of  the  county  court  under  whose  order  of  sale 
the  administrator's  sale  of  these  lands  of  Riley  was  made,  were  a 
link  in  the  chain  of  title  of  the  mortgaged  lands,  and  purchasers 
from  Powell  must  be  held  as  having  notice  of  them.  These  pro- 
ceedings show  that  the  sale  was  to  be  on  a  credit,  and  that  the 
purchaser  was  to  give  a  mortgage  on  the  land  purchased,  and  a 
note  with  personal  security;  they  show  the  sale  of  the  lands  to 
Powell,  and  Powell  alone  gives  the  mortgage  on  the  lands  pur- 


082      SPECIAL   EQUITIES   COUPLED    WITH   THE   MORTGAGE   RELATION 

chased.    These  circumstances,  we  think,  afford  notice  that  Powell 
was  the  principal  in  the  transaction,  and  Johnson  and  Abernathy 
but  his  sureties.    The  answer  of  Beaver,  too,  admits  such  surety- 
ship.^ 
The  decree  will  be  affirmed. 


GASKILL  V.  WALES 
Court  of  Errors  and  Appeals  of  New  Jersey,  1883 

(36  N.  J.  Eq.  527) 

The  Chancellor. 

This  is  an  appeal  from  a  decree  of  the  Burlington  circuit  court 
in  a  suit  for  foreclosure  of  a  mortgage  held  by  the  respondents' 
testator.  Dr.  Edmond  L.  B.  Wales,  on  land  in  that  country.  The 
mortgaged  premises  are  a  tract  of  twenty-two  and  seventy-one 
hundredths  acres.  They  were  owned  on  the  11th  day  of  May, 
1874,  by  Joseph  Grubb,  and  were  then  subject  to  two  mortgages 
thereon,  given  by  him  to  Caleb  Wilkins,  one  for  SI, 000  and  inter- 
est, and  the  other  for  $200  and  interest.  On  that  day  Grubb  bor- 
rowed of  Dr.  Whales  $2,000  on  mortgage  of  the  property,  and  it  was 
agreed  between  them  that  the  mortgage  should  be  the  first  lien 
thereon.  It  was  given  accordingly.  With  part  of  the  $2,000  the 
Wilkins  mortgages  were  paid,  and  they  were  then,  by  direction  of 
Dr.  Wales's  attorney,  canceled  of  record.  On  the  1st  of  Maj', 
1874,  a  few  days  before  the  Wales  mortgage  was  given,  Grubb 
began  the  building  of  a  dwelling-house  on  part  of  the  property. 
The  firm  of  Laumaster  &  Wright  and  Samuel  E.  Hancock  furnished 
materials  for  the  home,  and  Nathan  Gaskill  did  work  thereon. 
They  filed  and  prosecuted  to  judgment  lien-claims  under  the 
mechanic's  lien  law,  for  money  due  them  therefor,  and  under 
executions  on  those  judgments  the  dwelling-house  and  the  cur- 
tilage thereof  were  sold,  December  11th,  1875,  to  Hancock  and  the 
firm  of  Laumaster  &  Wright.  The  respondents  claim  that  they 
are  in  equity  entitled  to  be  subrogated  to  the  rights  which  Wilkins 
had  under  his  mortgages  when  they  were  paid  off,  to  the  extent  to 
which  the  money  lent  by  their  testator  was  used  in  the  payment  of 
those  mortgages,  and  that  for  that  amount  and  interest  they  are 
entitled  to  priority  over  the  purchasers  of  the  property  under  the 
lien-claims.    The  principle  of  subrogation  is  one  of  equity  merely, 

1  Portion  of  opinion  dealing  with  foreign  questions  omitted. 


HOWARD    V.    ROBBINS  683 

and  it  will  accordingly  be  applied  only  in  the  exercise  of  an  eciui- 
table  discretion,  and  always  with  a  due  regard  to  the  legal  and 
equitable  rights  of  others. 

In  the  case  in  hand,  the  Wilkins  mortgages  were  canceled  of 
record,  and  the  purchasers  under  the  executions  had  no  notice  of 
anj'  kind  of  the  existence  of  any  claim  to  the  equity.  They  had  no 
notice  except  what  the  records  afforded.  To  give  the  respondents' 
mortgage  priority  over  the  lien-claims  would  therefore  manifestly 
be  highly  unjust  to  the  purchasers  who  bought  in  ignorance  of  any 
right  or  claim  to  such  priority.  In  the  absence  of  any  other  notice 
they,  of  course,  had  a  right  to  rely  on  the  condition  of  the  records, 
and  having  done  so  they  cannot  be  defeated  or  prejudiced  by  a 
latent  equity.  Their  title,  therefore,  to  the  dwelling-house  and 
curtilage  is  paramount  to  the  respondents'  mortgage.  The  decree 
will  be  reversed,  with  costs,  with  directions  to  the  circuit  court  to 
enter  a  decree  for  the  foreclosure  and  sale  of  the  rest  of  the  prop- 
erty only. 

Decree  unanimously  reversed. 


HOWARD  V.  ROBBINS 

Court  of  Appeals  of  New  York,  1902 

(170  N.  Y.  498) 

CuLLEN,  J.  The  defendant  and  respondent,  Walter  G.  Robbins, 
on  September  4th,  1897,  executed  and  delivered  to  the  plaintiffs' 
testator  a  bond  with  a  mortgage  on  certain  leasehold  property  in 
the  city  of  Buffalo  to  secure  the  payment  of  five  thousand  dollars. 
On  March  21st,  1898,  Robbins  and  wife  conveyed  the  premises  to 
the  Ellicott  Square  Bank  by  quitclaim  deed  for  a  consideration  of 
one  dollar,  in  which  deed  there  was  no  reference  to  the  mortgage. 
The  bank  paid  one  thousand  dollars  on  account  of  the  principal 
of  the  mortgage.  On  September  14th,  1899,  the  bank  conveyed  the 
same  premises  to  Harriette  E.  Jones  for  the  sum  of  one  thousand 
dollars,  which  deed  contained  the  following  provision:  ''This 
conveyance  is  made  with  the  understanding  that  the  party  of  the 
second  part  assume  a  certain  mortgage  given  by  Walter  G.  Rob- 
bins and  Francis  H.  Robbins  to  Ethan  H.  Howard,  and  recorded 
in  Erie  county  clerk's  office  in  Liber  863  of  mortgages  on  page  14 
(the  mortgage  in  suit)."  On  November  9th,  1899,  Harriette  E. 
Jones  mortgaged  the  same  premises,  "subject  to  a  mortgage  owned 


684      SPECIAL   EQUITIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

by  Caroline  H.  Howard,  upon  which  there  is  (hie  four  thoTisand 
dollars,"  to  Mary  H.  Ney  to  secure  the  payment  of  two  thousand 
dollars.  This  last-mentioned  mortgage  was  on  the  same  day 
assigned  to  the  defendant  and  appellant,  the  Third  National  Bank 
of  Buffalo.  In  January,  1891,  the  plaintiffs  brought  an  action  to 
foreclose  said  first-named  mortgage  in  which  judgment  of  fore- 
closure and  sale  was  entered  on  March  6th,  1891  The  decree 
directed  a  deficiency  judgment  against  the  defendant  Walter  G. 
Kobbins  only.  Shortl}'  thereafter  the  bond,  mortgage  and  judg- 
ment were  assigned  to  the  defendant,  the  Third  National  Bank  of 
Buffalo.  Robbins,  through  his  attorney,  then  requested  the  Third 
National  Bank  that  it  either  forthwith  execute  the  judgment  or 
that  it  assign  the  same  to  him,  and  tendered  the  amount  due 
thereon.  The  bank  declined  to  accede  to  this  demand,  and  under 
an  arrangement  with  the  owner  of  the  equity,  Mrs.  Jones,  collected 
the  income  of  the  property  and  applied  it  on  its  mortgage.  The 
unexpired  term  of  the  leasehold  was  about  fifteen  years.  The 
owner  had  made  default  in  the  ground  rent  and  taxes  which  the 
plaintiffs  had  been  obliged  to  pay.  On  an  affidavit  stating  these 
matters  and  the  further  fact  that  Robbins  had  originally  bought 
the  premises  as  the  agent  of  the  Ellicott  Square  Bank  and  had 
executed  the  mortgage  on  an  agreement  made  by  the  bank  that 
it  would  indemnify  and  save  him  harmless  from  liability  on  ac- 
count thereof,  Robbins  applied  for  an  order  directing  the  ap- 
pellant to  assign  to  him  the  decree  and  mortgage  on  the  payment 
of  the  amount  due  thereon.  This  motion  was  resisted.  There  was 
no  dispute  as  to  the  chain  of  title  which  has  been  stated,  but  the 
appellant  denied  anj^  knowledge  of  the  relations  between  Robbins 
and  the  Ellicott  Square  Bank  or  of  the  agreement  for  indemnity 
between  the  parties.  The  application  of  Robbins  was  granted  and 
an  appeal  from  that  order  taken  to  the  Appellate  Division.  After 
such  appeal  Robbins  moved  for  the  appointment  of  a  receiver  of 
the  rents  and  profits,  which  application  was  granted.  From  that 
order  also  an  appeal  was  taken  to  the  Appellate  Division,  which  by 
a  divided  court  affirmed  both  orders.  The  Appellate  Division  has 
allowed  an  appeal  to  this  court  and  certified  to  us  the  following 
questions:  First:  Is  the  defendant  Walter  G.  Robbins  entitled  to 
compel  the  execution  and  delivery  of  an  assignment  of  the  bond, 
mortgage  and  judgment  of  foreclosure  and  sale  to  him  from  the 
Third  National  Bank  of  Buffalo,  N.  Y.?  Second:  Should  a  receiver 
of  the  rents,  issues,  income  and  profits  of  the  leasehold  property 
described  in  the  complaint  be  appointed? 


HOWARD    V.    ROBBINS  685 

We  are  of  opinion  that  the  Countj''  Court  properly  (hreeted  an 
assignment  of  the  moitgage  to  the  respondent.  In  reaching  this 
conclusion  we  do  not  deem  it  necessary  to  decide  whether  the  de- 
fendant Hai-riette  E.  Jones  became  personally  liable  for  the  mort- 
gage debt,  though  we  do  not  mean  to  express  any  dissent  from  the 
prevailing  opinion  of  the  Appellate. IDivision  on  that  point.  It  is 
sufficient  for  the  disposition  of  this  branch  of  the  appeal  to  deter- 
mine whether  as  to  the  respondent  Robbins  he  or  the  mortgaged 
land  was  primaril}^  liable  for  the  mortgage  debt.  While  in  the 
first  instance  the  mortgagor  is  the  principal  debtor  and  the  land 
merely  security,  this  relation  may  become  modified  when  the 
mortgagor  ceases  to  be  the  owner  of  the  land.  Thus  if  the  land  be 
sold  on  execution  against  the  mortgagor  or  under  a  second  mort- 
gage the  purchaser  acquires  only  the  equity  of  redemption  and  the 
land  becomes  the  primary  source  from  which  the  mortgage  must 
be  satisfied,  not  the  personal  responsibility  of  the  mortgagor. 
{Tice  V.  Annin,  2  Johnson  Ch.  125;  McKinstry  v.  Curtis,  10  Paige, 
503;  Weaver  v.  Toogood,  1  Barb.  238;  Mathews  v.  Aikm,  1  N.  Y. 
595.)  In  case  of  the  voluntary  alienation  of  the  land  by  the 
mortgagor  the  question  as  to  where  the  primary  liability  rests 
depends  on  the  agreement  of  the  parties.  If  the  mortgagor  con- 
vey with  warranty  and  in  this  state  if  he  receive  the  whole  purchase 
money  and  convey,  even  without  warranty  by  deed  not  subjecting 
the  land  to  the  mortgage  he  remains  primaril}^  liable  for  the  debt. 
(Wadsivorth  v.  Lyon,  93  N.  Y.  201.)  On  the  other  hand,  the  de- 
duction of  the  amount  of  the  mortgage  evidences  an  intent  to 
subject  the  property  conveyed  to  its  payment.  (Bennett  v.  Bates, 
94  N.  Y.  354.)  The  general  rule  is  laid  down  in  Jones  on  Mort- 
gages (section  736):  "One  who  purchases  an  equity  of  redemption 
by  a  deed  without  covenants  takes  the  estate  charged  with  the 
payment  of  the  mortgage  debt.  It  is  presumed,  in  the  absence  of  a 
special  contract  or  of  any  unusual  circumstance,  that  the  amount 
paid  was  the  price  of  the  property  purchased,  less  the  amount  of 
the  mortgage,  and  it  would  be  for  the  purchaser,  and  not  the  seller, 
to  discharge  the  incumbrance."  This  was  so  held  in  Shuler  v. 
Hardin  (25  Ind.  386);  Atherton  v.  Toney  (43  Ind.  211);  Gayle  v. 
Wilson  (30  Gratt.  166).  In  this  case  the  conveyance  by  the  re- 
spondent was  a  quitclaim  deed  and  the  consideration  was  one 
dollar.  The  form  of  the  deed  was  appropriate  for  the  conveyance 
of  the  equity  of  redemption  and  it  cannot  be  presumed  in  the 
absence  of  evidence  of  an  agreement  to  that  effect  that  the  grantor 
intended  to  convey  for  the  sum  of  one  dollar  land  which  he  had 


1)86      SPECIAL  EQUITIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

been  able  to  mortgage  for  five  thousand  dollars,  he  to  remain 
bound  to  discharge  the  incumbrance.  On  the  face  of  the  deed  the 
presumption,  therefore,  is  that  the  land  was  to  be  primarily  charged 
with  the  payment  of  the  mortgage.  This  intention  is  further 
evidenced  by  the  conveyance  from  the  Ellicott  Square  Bank  to  the 
defendant  Harriette  E.  Jones.  ,  Conceding  that  Mrs.  Jones  did  not 
become  liable  personally  for  the  payment  of  the  mortgage  debt 
because  her  grantor  was  not  liable  for  it,  nevertheless  her  agree- 
ment to  assume  the  mortgage  certainly  was  effective  to  charge  the 
land  conveyed  with  its  payment.  The  land  being  conveyed  to  her 
subject  to  the  mortgage,  neither  she  nor  her  grantees  could  deny 
that  it  was  primarily  charged  with  the  payment  of  the  debt. 
{Sands  v.  Church,  6  N.  Y.  347.)  The  mortgage  under  which  the. 
appellant  claims  also  recites  that  it  is  subject  to  the  mortgage  made 
by  the  respondent.  Under  these  instruments  it  would  seem  en- 
tirely plain  that  the  appellant  never  acquired  as  security  for  its 
loan  anj'thing  more  than  the  equity  of  redemption  after  the  dis- 
charge and  satisfaction  of  the  first  mortgage.  The  respondent, 
therefore,  was  entitled  on  payment  of  his  bond  to  be  subrogated  to 
the  rights  of  the  mortgagee  and  to  require  an  assignment  of  the 
mortgage  in  order  that  he  might  reimburse  himself  by  enforcing  it 
against  the  mortgaged  property.  (Johnson  v.  Zink,  51  N.  Y.  333.) 
It  is  true  that,  as  between  the  appellant  and  the  plaintiffs  in  this 
action,  the  former  was  entitled  to  an  assignment  of  the  mortgage, 
but  as  the  respondent  was  entitled  on  payment  to  subrogation  as 
against  the  mortgagee  he  could  be  no  less  entitled  to  that  relief  as 
against  any  assignee  of  the  mortgagee.  The  only  interest  the  re- 
spondent had  was  to  reheve  himself  from  liability  on  the  bond. 
If  the  appellant  wished  to  keep  the  security  alive  against  the  land, 
and  it  had  offered  to  discharge  the  respondent  from  personal 
liability,  doubtless  the  application  would,  on  compliance  with  that 
condition,  have  been  denied.  So,  also,  if  the  appellant  desired  an 
immediate  sale  of  the  property,  the  court  might  properly  have  re- 
quired the  prompt  execution  of  the  judgment  as  a  condition  of  the 
assignment.  These,  however,  were  matters  resting  in  the  discre- 
tion of  the  trial  court.  It  sought  to  satisfy  its  mortgage  out  of  the 
mortgaged  property,  to  the  detriment  of  the  first  mortgage,  and 
then  to  hold  the  respondent  liable  on  his  bond. 

It  had  no  right  to  pursue  that  course.  It  is  said  that  the  lia- 
bility of  the  respondent  as  the  principal  debtor  was  fixed  by  the 
judgment  and  foreclosure,  and  that  the  appellant,  in  purchasing 
the  judgment,  was  entitled  to  rely  on  the  assumption  that  the 


it 


harbert's  case  687 

rights  of  the  parties  were  conclusively  established  by  it.  The 
judgment  did  not  settle  the  liabilities  of  the  defendants  as  be- 
tween themselves.  (Wadsworth  v.  Lyon,  supra.)  If  it  had,  it 
would  be  fatal  to  the  appellant's  position,  for  the  judgment  decreed 
that  the  land  should  be  sold  first  and  the  respondent  answer  only 
for  any  deficiency,  thus  making  the  land  the  primary  source  for 
the  payment  of  the  mortgage. 

The  facts  appearing  in  the  affidavits  were  sufficient  to  justify 
the  trial  court  in  appointing  a  receiver  pending  the  appeal,  which 
is  expressly  authorized  by  section  713  (sub-div.  3)  of  the  Code  of 
Civil  Procedure.  The  ground  rent  and  taxes  were  in  arrears  and 
the  security  doubtful.  The  pecuniary  responsibility  of  the  re- 
spondent was  wholly  immaterial,  as  the  judgment  was  to  be  en- 
forced not  against  him,  but  in  his  favor. 

The  order  appealed  from  should  be  affirmed,  with  costs,  and 
both  questions  certified  answered  in  the  affirmative.^ 

Parker,  Ch.  J.,  Gray,  O'Brien,  Bartlett,  Haight  and 
Werner,  JJ.,  concur. 

HARBERT'S  CASE 

Court  OF  Exchequer,  1584 

(3  Coke's  Rep.  lib) 

And  in  this  case  divers  points  were  resolved : 

Secondly,^  it  was  resolved,  that  in  case  of  a  common  person, 
the  heir  of  the  conusor,  or  he  against  whom  the  judgment  is  given 
in  debt,  shall  be  only  charged,  and  shall  not  have  contribution 
against  the  ter-tenant  in  some  cases,  and  in  some  cases  he  shall 
have  contribution,  and  shall  not  be  only  charged.  For  if  a  man  be 
seised  of  three  acres  of  land,  and  acknowledges  a  recognizance,  or 
a  statute,  &c.,  and  enfeoffs  A  of  one  acre,  B  of  another,  and  the 
third  descends  to  his  heir;  in  this  case,  if  execution  be  sued  only 
against  the  heir,  he  shall  not  have  contribution,  for  he  comes  to 
the  land  without  consideration,  and  the  heir  sits  in  the  seat  of 
his  ancestor.  Et  hceres  est  alter  ipse,  et  filius  est  pars  patris,  and  as 
it  is  said,  mortuus  est  pater,  et  quasi  non  est  mortuus,  quia  reliquit 
similem  sihi;  and  therefore  the  heir  shall  not  have  contribution 
against  any  purchaser,  although  in  rei  veritate  the  purchaser  came 

1  And  see   Sternbach  v.  Friedman,  ^  The  opinion  on  this  point  only  is 

34  App.  Div.  (N.  Y.)  534  (1898).  given. 


688      SPECIAL   EQUITIES   COUPLED    WITH   THE   MORTGAGE   RELATION 

to  the  land  without  any  valuable  consideration,  for  the  considera- 
tion of  the  purchase  is  not  material  in  such  case.  And  so  it  was 
of  late  resolved  in  the  case  of  Thomas  Gawdie,  late  Marshal  of  the 
King's  Bench,  that  the  heii-  may  be  solely  charged,  and  shall  not 
have  contribution  against  purchasers.^ 


SANFORD  V.  HILL 

Supreme  Court  of  Errors  of  Connecticut,  1878 

(46  Conn.  42) 

Pardee,  J.  In  1870,  Maria  Bouton  mortgaged  a  certain  tract, 
of  land,  with  other  lands,  to  the  Norwalk  Savings  Society  to  se- 
cure the  payment  of  S10,000;  in  1871  she  conveyed  a  portion  of 
this  tract,  which  we  will  designate  as  lot  B,  to  E.  J.  Hill,  by  a  deed 
warranting  it  to  be  free  and  clear  from  all  incumbrances,  which 
deed  was  immediately  recorded  in  the  town  records.  When  he 
received  it  he  made  a  parol  agreement  with  the  grantor  that  he 
would  pay  $300  upon  the  mortgage  indebtedness  to  the  savings 
bank  as  part  consideration  for  his  purchase.  In  1873  he  conveyed 
his  interest  in  the  lot  to  Hubbell  &  Tolles,  by  a  quit-claim  deed, 
in  which  there  was  no  mention  of  any  mortgage  upon  it,  which 
deed  was  duly  recorded.  They  entered  into  a  parol  agreement 
with  Hill  to  pay  the  $300  to  the  bank;  neither  Hill  nor  Hubbell  & 
Tolles  have  ever  paid  this  money,  and  the  last  two  were  adjudged 
bankrupts  in  1875,  and  John  H.  Smith  was  appointed  their  as- 
signee. 

In  1873,  Maria  Bouton  conveyed  a  portion  of  the  tract  orig- 
inally mortgaged  to  the  bank,  which  we  will  designate  as  lot  C, 
to  Delia  A.  Sanford,  the  petitioner,  by  a  quit-claim  deed. 

Maria  Bouton,  by  giving  a  deed  of  warranty  of  B  to  E.  J.  Hill, 

1  In  Lanoy  v.  Duke  of  Athol,  2  Atk.  gagee,  if  that  is  sufficient  to  satisfy 

444,  Lord  Hardwicke  said:  "Sup-  the  first  mortgage,  in  order  to  make; 

pose  a  person  who  has  two  real  es-  room  for  the  second  mortgagee,  even 

tates,  mortgages  both  to  one  person,  though    the    estates    descended    to 

and  afterwards  only  one  estate  to  a  two  different  persons." 

second  mortgagee,  who  had  no  no-  To  similar  effect,  see  Chancellor 

tice  of  the  first;  the  court,  in  order  to  Kent    in    Clowes    v.    Dickenson,    5 

relieve  the  second  mortgagee,  have  Johns.  Ch.  235  (1821),  and  Miller, 

directed  the  first  to  take  his  satisfac-  J.,  in  National  Savings  Bank  v.  Cres- 

tion  out  of  that  estate  only  which  is  well,  100  U.  S.  630  (1880). 
not  in  mortgage  to  the  second  mort- 


SANFORD    v.    HILL  669 

SO  far  forth  a.s  they  and  any  subsequent  purchasers  of  C  are  coa- 
€erned,  freetl  B  from  the  burden  of  the  mortgage  and  placed  it 
upon  C;  this  last  lot,  upon  foreclosure  by  the  bank,  must  have 
paid  the  whole  debt  if  of  sufficient  value;  Hill,  by  recording  his 
deed,  gave  notice  to  all  persons  of  the  precise  nature  and  extent 
of  her  right  to  and  interest  in  C;  under  such  notice  Mrs.  Sanford 
took  precisely  that  right  and  no  greater,  presumably  taking  the 
fact  disclosed  by  the  notice  into  consideration  in  establishing  the 
price;  Hill's  rights  in  and  to  B  having  been  previously  fixed  by  the 
record  of  his  deed  are  not  to  be  diminished  or  affected  by  the  sub- 
sequent conveyance  of  C. 

Ebenezer  Hill,  having  purchased  of  the  savings  bank  the  Bouton 
note  and  mortgage,  brought  in  December,  1875,  a  petition  for 
foreclosure,  making  the  present  petitioner,  Mrs.  Sanford,  and 
Smith  as  assignee  of  Hubbell  &  ToUes,  respondents;  the  court 
passed  a  decree  foreclosing  Mrs.  Sanford  unless  she  paid  the  debt 
on  or  before  April  3d,  1876,  and  Smith  unless  he  paid  on  or  be- 
fore April  10th.  Mrs.  Sanford  paid  to  Ebenezer  Hill  the  whole 
amount  due  upon  the  mortgage,  and  received  from  him  the  note, 
together  with  a  conveyance  of  his  interest  in  B  and  C;  and  she 
has  brought  this  present  petition  to  compel  David  Hill  to  con- 
tribute towards  the  sum  thus  paid  such  proportion  as  lot  B  bears  in 
value  to  lots  B  and  C.  The  court  below  found  that  proportion  to 
be  S282.50,  and  decreed  that  he  should  pay  that  sum. 

The  verbal  promise  to  pay  $300  on  the  mortgage  debt  made 
by  E.  J.  Hill  to  Maria  Bouton  was  accepted  by  the  latter  as  part 
of  the  price  of  the  land;  this  promise  was  made  known  to  Hubbell 
&  Tolles,  who  verbally  proinised  E.  J.  Hill  that  they  would  pay 
this  sum.  The  recorded  deeds  contain  no  reference  to  this  agree- 
ment, and  the  case  finds  that  David  Hill  had  no  knowledge  of  it 
until  after  he  had  taken  his  deed.  He  is  a  bona  fide  purchaser  for 
full  value  without  notice.  He  is,  of  course,  to  be  charged  with 
notice  that  the  mortgage  covered  lot  B,  but  the  extent  of  that 
notice  is,  that  B  is  chargeable  in  equity  only  after  C  is  exhausted; 
his  ignorance  of  the  private  parol  agreement  releases  him  from 
any  equitable  duty  in  reference  to  it;  that  agreement  being  private 
and  unrecorded  the  effect  of  it  ceases  exactly  when  actual  knowl- 
edge of  it  ends. 

The  rule  which  imposes  the  burden  primarily  upon  lot  C,  in  the 
inverse  order  of  conveyance  by  Mrs.  Bouton,  is  a  logical  result 
of  our  recording  system  and  has  a  firm  foundation  in  equity;  more- 
over, it  is  the  prevailing  rule  in  this  country  and  in  England.    In 


690      SPECIAL  EQUITIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

Clowes  V.  Dickinson,  5  Johns.  Ch.  240,  Chancellor  Kent  referred  to 
HarherVs  Case,  3  Coke,  11,  where  it  was  resolved  that  if  a  man  be 
seized  of  three  acres  and  acknowledge  a  recognizance  or  statute, 
and  enfeoff  A  of  one  acre  and  B  of  another,  and  the  third  acre 
descends  to  the  heir,  and  execution  be  sued  out  against  the  heir, 
he  shall  not  have  contribution  against  purchasers,  "for  the  heir 
sits  in  the  seat  of  the  ancestor;"  and  the  chancellor  adds,  in  refer- 
ence to  successive  purchasers  of  different  portions  of  incumbered 
property,  that  they  too  may  be  said  to  sit  in  the  seat  of  their 
grantors.  The  rule  has  received  judicial  sanction  in  the  following 
cases:— James  v.  Hubbard,  1  Paige,  234;  Jenkins  v.  Freyer,  4  id. 
53;  Guion  v.  Knapp,  6  id,  35;  Patty  v.  Pease,  8  id.  277;  Skeel  v. 
Sproker,  id.  182;  Lijman  v.  Lyman,  32  Verm.  79;  Shannon  v.  Mar- 
selis,  1  Saxton,  413;  Wickoffv.  Davis,  3  Green.  Ch.  224;  H inkle  v. 
Alstadt,  4  Gratt.  284;  Jones  v.  Myrick,  8  id.  179;  Brown  v.  Sim- 
Mons,  44  N.  Hamp.  475;  Holden  v.  Pike,  24  Maine,  427;  Shepherd 
V.  Adams,  32  id.  63;  Wallace  v.  Stevens,  64  id.  225;  Chase  v.  Wood- 
bury, 6  Cush.  143;  hooper  v.  Bigley,  13  Mich.  463. 

In  Kentucky  {Dickey  v.  Thompson,  8  B.  Monroe,  312,)  and  in 
Iowa  {Bates  v.  Ruddick,  2  Clark,  423,)  the  rule  of  equality  of  con- 
tribution among  all  the  purchasers  of  the  mortgaged  premises, 
contended  for  by  the  petitioners,  is  applied,  but  we  think  that 
the  weight  of  judicial  opinion  is  as  we  have  before  indicated. 

The  petitioners  urge  that,  inasmuch  as  David  Hill  took  his  deed 
of  lot  B  from  Smith,  assignee  of  Hubbell  &  Tolles,  on  a  day  subse- 
quent to  the  bringing  of  the  petition  for  foreclosure  by  Ebenezer 
Hill,  the  purchaser  of  the  note  and  mortgage  from  the  bank,  and 
as  Mrs.  Sanford's  claim  for  contribution  against  lot  B  arises  from 
the  fact  that  the  decree  upon  that  petition  compelled  her  to  pay 
the  whole  debt  first  in  order  of  time,  she  now  has  the  same  right 
against  David  Hill  that  she  would  have  had  against  Smith,  as- 
signee, his  grantor. 

But  the  doctrine  of  lis  pendens,  that  the  purchaser  of  property 
the  title  to  which  is  then  the  subject-matter  of  judicial  investiga- 
tion, is  held  to  have  notice  of  the  existing  suit  and  is  to  be  bound 
by  the  future  judgment  or  decree  therein,  does  not  assist  the  peti- 
tioners. The  pending  litigation  was  the  petition  for  foreclosure 
by  Ebenezer  Hill,  the  owner  of  the  original  note  and  mortgage, 
enforcing  the  rights  held  by  the  bank  on  the  one  side  and  Mrs. 
Sanford  and  David  Hill,  subsequent  purchasers  of  lots  covered  by 
the  mortgage,  on  the  other,  the  bank,  or  its  assignee,  Ebenezer 
Hill,  had  the  right  to  receive  the  amount  of  the  debt  from  lot  C 


WORTH    V.    HILL  691 

or  from  both  B  and  C;  and  the  court  simply  enforced  the  equities 
existing  between  the  last  named  parties,  by  placing  the  whole 
burden  primarily  upon  lot  C.  But  it  was  neither  the  prayer  of  the 
petition,  nor  the  issue  of  the  pleadings,  nor  the  scope  of  the  decree, 
to  determine  that  lot  B  was  liable  to  contribute  to  the  payment 
of  the  mortgage.  That  question  was  first  raised  in  this  proceeding, 
and  remains  unaffected  by  any  previous  litigation. 
There  is  error  in  the  judgment  complained  of. 


WORTH  V.   HILL 

Supreme  Court  of  Wisconsin,  1861 

(14  Wis.  559) 

Paine,  J.  This  was  an  action  to  foreclose  a  mortgage,  and  the 
appeal  presents  a  contest  merely  between  two  subsequent  incum- 
brancers of  different  tracts  covered  by  this  mortgage,  as  to  which 
was  entitled,  in  equity,  to  have  the  tract  of  the  other  sold  first. 
Perhaps  the  following  general  statement  of  the  situation  of  the 
parties,  will  be  sufficient  to  a  proper  understanding  of  the  question 
decided. 

The  mortgage  being  foreclosed  covered  two  different  tracts  in 
different  towns.  The  defendant  Buck,  who  is  the  appellant,  held 
a  mortgage  next  to  this  in  point  of  time,  covering  one  of  the  tracts 
contained  in  this  mortgage,  and  other  land  not  covered  by  this, 
in  the  same  town.  The  defendant  Mowry  held  a  mortgage  next 
to  Buck's  in  point  of  time,  but  upon  the  land  in  the  other  town 
covered  by  this  mortgage,  and  also  upon  another  tract.  Thus  it 
will  be  seen  that  the  mortgage  of  Mowry  was  not  upon  any  part 
of  the  land  mortgaged  to  Buck,  but  their  interests  conflict  by 
reason  of  the  mortgage  which  is  being  foreclosed,  which  is  prior 
to  both,  and  covers  a  part  of  the  land  incumbered  by  each  of  these 
defendants.  It  further  appeared  that  there  was  a  mortgage  prior 
to  all  these,  covering  the  tract  in  the  Buck  mortgage  and  the  one  in 
the  Mowry  mortgage  which  are  not  contained  in  the  mortgage  now 
being  foreclosed,  and  that  such  prior  mortgage  had  been  foreclosed, 
and  that  part  which  was  covered  by  Mowry' s  mortgage  adjudged 
to  be  sold  before  the  part  covered  by  Buck's.  It  was  further  proved 
that  the  other  tract  covered  by  Buck's  mortgage  was  ample  se- 
curity for  the  amount  of  the  debt  secured  by  that  mortgage.  It 
was  even  shown  to  be  of  greater  value  than  the  entire  amount  of 


692      SPECIAL   EQUITIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

the  Buck  mortgage  and  the  first  mortgage  before  referred  to,  prior 
to  all,  for  the  satisfaction  of  which  the  other  tract  covered 
h}'  Mowry^s  mortgage  had  been  adjudged  to  be  first  sold.  Upon 
this  state  of  facts,  the  court  below  decreed  that  the  portion  covered 
by  Buck's  mortgage  should  be  sold  in  this  foreclosure  before  that 
covered  by  Mown/ a,  and  from  that  part  of  the  decree  Buck  brought 
this  appeal. 

His  counsel  relies  upon  the  established  equitable  rule,  that  in 
foreclosure  cases,  where  the  land  has  been  subsequently  conveyed 
by  the  mortgagor,  it  shall  be  sold  in  the  inverse  order  of  alienation. 
The  justice  of  this  rule  has  been  some  time  questioned,  but  we 
regard  it  as  not  only  well  settled,  but  correct  upon  principle,  and 
have  repeatedly  enforced  it.  But  at  the  same  time  we  think  it 
may  be  controlled  by  other  established  equitable  principles,  where 
the  facts  render  them  applicable,  and  such  we  think  was  the  case 
here.  It  is  a  familiar  principle,  that  where  one  creditor  has  security 
upon  two  funds,  and  another  has  security  upon  one  of  them 
only,  the  latter  may  compel  the  former  to  resort  first  to  that 
fund  which  he  cannot  reach.  And  although  this  is  not  a  direct 
proceeding  to  accomplish  that  object,  yet  it  is  substantially 
that,  inasmuch  as  Mowry  sets  up  these  facts  to  rebut  the 
equity  Buck  would  otherwise  have  as  against  him.  For  the  result, 
if  the  judgment  had  been  otherwise,  would  have  deprived  Mowry 
of  his  security  entirely.  The  one  tract  covered  by  his  mortgage 
having  already  been  adjudged  to  be  sold  first,  for  Buck's  benefit, 
now  if  the  other  should  be  adjudged  to  be  sold  first,  he  would  have 
nothing  left.  Whereas  it  appears  by  the  testimony,  that  upon  the 
decree  as  rendered,  Mowry  is  protected,  and  Buck  left  with  ample 
security  for  his  debt. 

Suppose  A  mortgages  a  tract  to  B,  then  gives  a  second  mortgage 
on  a  part  of  it  to  C,  which  mortgage  also  covers  other  tracts,  and 
then  gives  a  mortgage  on  another  part  to  D?  On  a  foreclosure  of 
B's  mortgage,  the  ordinary  rule,  based  merely  on  the  order  of 
alienation,  would  be  to  sell  D's  part  first.  But  suppose  D  could 
show  that  the  other  tracts  covered  by  C's  mortgage  were  an  ample 
security  for  his  debt,  would  not  that  raise  an  equity  sufficient  to 
overcome  the  ordinary  rule,  and  require,  as  between  C  and  D,  that 
C's  part  should  be  first  sold?  I  think  so;  and  that  is  substantially 
the  relation  which  these  defendants  hold  to  each  other  in  the 
present  case.  I  can  see  no  reason  why  the  principle  requiring  the 
creditor  having  two  funds  to  resort  first  to  the  one  which  the  other 
creditor  cannot  reach,  is  not  applicable  to  such  a  case.    It  is  true 


LIBBY    V.    TUFTS  693 

that  ordinarily  the  adequacy  of  the  first  fund  nii^ht  be  tested  by 
an  actual  sale,  and  the  creditor  who  was  compelled  first  to  resort 
to  that,  might  still  be  in  a  position  to  resort  to  the  other,  to  supply 
any  deficiency;  and  here  Buck  may  not  be  left  in  such  a  position.  1 
think  that  is  good  reason  why  such  a  decree  as  the  one  made  in  this 
case,  should  Ije  made  only  upon  clear  proof  of  the  entire  inade- 
quacy of  the  remaining  security.  But  I  am  not  prepared  to  say 
that  courts  should  not  act  upon  such  proof,  or  that  a  party  so  sit- 
uated has  any  absolute  right  to  have  the  adequacy  of  his  remain- 
ing security  tested  in  all  cases  by  an  actual  sale.  It  is  obvious 
that  such  a  test  could  not  be  had  in  a  case  like  this,  and  conse- 
quently, if  that  rule  were  adopted,  it  would  lead  to  the  injustice 
of  cutting  off  the  last  mortgagee  entirely,  though  it  might  not  be 
at  all  necessary  for  the  protection  of  the  second.  Courts  are  con- 
stantly adjudicating  upon  the  most  important  rights  of  parties 
upon  the  theory  that  human  testimony  can  establish  facts  with 
sufficient  certainty  to  justify  such  adjudication,  and  I  think  the 
question  of  the  adequacy  or  inadequacy  of  a  security  should  form 
no  exception. 

I  think  the  judgment  should  be  affirmed,  with  costs,  against  the 
appellant,  in  favor  of  the  plaintiffs  and  of  Mowry. 

Judgment  affirmed  accordingly. 


LIBBY   V.   TUFTS 

Court  of  Appeals  of  New  York,  1890 

(121  .v.  F.  172) 

Appeal,  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  the  second  judicial  department,  entered  upon  an  order 
made  May  18,  1888,  which  affirmed  a  judgment  in  favor  of  plaintiff 
entered  upon  the  report  of  a  referee. 

This  action  was  brought  for  the  foreclosure  of  a  mortgage. 

The  facts  are  sufficiently  stated  in  the  opinion. 

O'Brien,  J.  The  action  was  brought  to  foreclose  a  mortgage 
given  to  secure  the  payment  of  $125,000,  bearing  date  January  29, 
1883,  and  duly  recorded  the  next  day,  upon  ten  several  lots  of 
land  in  the  city  of  New  York,  upon  which  houses  were  being  con- 
structed at  the  time  of  the  execution  and  delivery  of  the  mortgage; 
the  houses  having  been  completed  at  the  time  of  the  commence- 


694      SPECIAL   EQUITIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

ment  of  this  action.  Nine  of  the  lots  were  released  from  the  lien 
of  the  mortgage  from  time  to  time,  as  payments  were  made,  and 
prior  to  the  commencement  of  the  suit.  The  complaint  statee 
that  the  sum  of  $3,603.22  was  due  and  unpaid  upon  the  mortgage, 
hut  the  referee  found  that  the  amounts  so  due  was  $1,801.61. 

Only  one  of  the  ten  lots  is  sought  to  be  sold  under  the  prayer  of 
the  complaint  and  the  terms  of  the  decree  entered  in  the  action. 

The  mortgage  in  question  was  executed  by  Mary  Duffy  and  her 
husband  to  the  plaintiff,  and  its  purpose  was  to  secure  the  paj^ment 
of  the  purchase-price  of  the  lots,  and  also  certain  advances  of 
money  made,  or  to  be  made,  from  time  to  time  to  the  mortgagor 
for  the  purpose  of  aiding  in  the  construction  of  buildings  upon  the 
lots. 

The  controversy  in  the  case  arises  out  of  the  answer  of  the  de- 
fendant Tufts,  that  after  the  execution  of  the  mortgage,  and  on  the 
7th  day  of  August,  1883,  Mary  Duffy,  the  mortgagor,  conveyed 
the  lot  directed  by  the  decree  in  this  action  to  be  sold  to  him;  that 
his  deed  was  duly  recorded  on  the  8th  day  of  August,  1883,  and 
that  then  the  mortgage  in  question  was  a  lien  upon  his  lot,  and  also 
upon  another  lot  which  the  mortgagor  afterwards,  and  on  the 
29th  day  of  August,  1883,  conveyed  to  one  James  Kane;  that 
the  plaintiff  having  full  notice  of  the  rights  of  the  defendant  Tufts, 
nevertheless,  thereafter,  and  in  the  month  of  October,  1883,  with- 
out defendant's  knowledge  or  consent,  released  and  discharged 
the  lot  conveyed  to  Kane  from  the  lien  of  the  mortgage,  and  that 
the  premises  so  released  were,  in  value,  more  than  sufficient  to 
pay  any  sum  due  for  principal  and  interest  on  the  mortgage. 

The  referee  has  found  that  the  conveyances  to  Kane  and  Tufts, 
and  the  release  of  the  mortgage  upon  his  lot,  were  made  and  de- 
livered at  the  respective  dates  set  forth  in  the  answer,  and  the  de- 
fense interposed  by  Tufts  would  be  good  were  it  not  for  other  facts 
and  other  transactions  connected  with  the  deed  to  Kane  which  will 
presently  be  noticed. 

The  general  equitable  rule  that  when  a  mortgage  covers  several 
parcels  of  land  that  are  separately  and  at  different  dates  sold  by 
the  mortgagor,  they  are  each  liable  to  sale  in  satisfaction  of  the 
mortgage,  as  against  the  purchasers  from  the  mortgagor,  in  the 
inverse  order  of  alienation,  is  not  disputed.  Where  the  holder  of  a 
mortgage,  with  notice  of  the  conveyance  of  a  separate  parcel  of 
the  land  to  a  purchaser  from  the  mortgagor,  releases  a  part  of  the 
land  subject  to  be  sold  first  for  the  satisfaction  of  the  mortgage, 
that  fact  generally  constitutes  a  defense  to  the  earlier  purchaser 


LIBBY    v.    TUFTS  695 

to  the  extent  of  the  value  of  the  land  released.  (Trustees,  etc.,  v. 
Wheeler,  61  N.  Y.  88;  Kendall  v.  Woodruff,  87  id.  7;  H.  Ins.  Co.  v. 
Halsey,  8  id.  271.) 

This  general  rule,  however,  is,  in  equity,  made  to  yield  to  the 
requirements  of  justice.  It  was  said  in  Kendall  v.  Woodruff  (supra) 
that  '■  it  is  not  always  that  a  release  of  part  of  the  mortgaged  prem- 
ises, given  with  knowledge  of  a  prior  conveyance  of  another  part 
that  remains  unreleased,  is  held  inequitable.  It  is  not  a  technical 
discharge  of  that  part,  nor  is  it  an  equitable  release  or  discharge, 
unless  upon  principles  of  natural  equity  and  justice  it  ought  to 
operate  against  the  mortgagee  giving  the  release." 

The  referee  has  found,  upon  sufficient  evidence,  that  the  con- 
tracts in  writing  entered  into  with  Kane,  though  in  form  signed 
by  the  husband  of  the  mortgagee  and  owner  of  the  land,  were  yet 
her  contracts,  made  under  her  direction,  and  bound  her  in  the  same 
way  as  if  she  signed  them  herself. 

Whether  the  discharge  by  the  plaintiff  of  the  lien  of  his  mort- 
gage upon  the  lands  to  Kane,  operated  in  equity  to  the  prejudice 
of  the  defendant  Tufts,  is  not  to  be  ascertained  or  tested  by  the 
mere  fact  that  Kane's  deed  was  made  and  delivered  at  a  later  date 
than  that  of  the  defendant  Tufts.  The  referee  has  found  that  at 
the  time  the  plaintiff  released  his  mortgage  upon  the  lot  conveyed 
to  Kane,  he  had  notice  of  the  conveyance,  prior  in  point  of  date, 
to  the  defendant  Tufts.  But  behind  the  conveyance  and  release 
to  Kane  are  certain  facts  and  equitable  considerations  which  can- 
not be  overlooked  in  adjusting  the  rights  of  the  parties. 

As  early  as  February,  1883,  Mrs.  Duffy,  the  mortgagor  and 
owner,  entered  into  a  contract  with  Kane  for  the  sale  of  the  lot 
which  was  afterwards  conveyed  to  him.  Kane  was  to  pay  $9,000 
for  it  by  performing  certain  work  and  labor  in  the  plumbing  of  the 
houses  then  in  process  of  construction  and  to  furnish  the  materials 
for  that  purpose.  It  is  found  that  as  early  as  July,  1883,  he  had 
performed  his  contract,  paid  the  purchase-price  as  provided  by  the 
contract,  and  entered  into  the  possession  of  the  premises.  Prior 
to  this  time  the  plaintiff  had  full  notice  of  the  contract  and  of  all 
of  Kane's  rights  under  it,  his  payments  thereon  and  his  possession. 
Thus  it  will  be  seen  that  a  month  prior  to  the  deed  of  the  mort- 
gagor to  the  defendant  Tufts,  Kane  had  contracted  to  purchase  the 
lot  afterwards  conveyed  to  him,  and  had  gone  into  possession  of 
the  same,  and  paid  the  consideration  therefor.  This  in  equity 
constituted  him  the  owner.  True  he  did  not  receive  the  deed  to 
the  premises  until  the  twenty-ninth  of  August  following,  but  he 


696      SPECIAL  EQUITIES   COUPLED   WITH   THE   MORTGAGE   RELATION 

had  possession,  and  every  right  in  equity  of  an  absolute  owner  in 
fee,  and  we  think  the  case  should  be  determined  in  the  same  way 
as  if  Kane  received  his  deed  at  the  time  he  fulfilled  his  contract 
and  went  into  possession.  On  the  seventh  of  August  thereafter, 
when  the  defendant  Tufts  took  his  conveyance,  Kane's  possession 
of  the  other  lot  was  notice  to  him  and  to  all  the  world  of  his  rights. 
Therefore,  we  think  that  the  mere  fact  that  Kane's  deed  was 
executed  and  delivered  at  a  later  date  than  that  of  the  defendant 
Tufts,  is  not  a  controlling  circumstance,  in  view  of  his  antecedent 
rights  and  equities. 

It  appears  also  by  the  findings  of  the  referee,  that  the  considera- 
tion of  the  deed  given  by  the  mortgagor  to  the  defendant  Tufts, 
was  a  past  due  debt,  while  Kane  at  the  time  of  taking  his  contract 
above  referred  to  obligated  himself  to  pay  in  the  future  the  sum  of 
$9,000  in  furnishing  the  material  and  the  performance  of  the  work 
in  the  construction  of  the  houses  upon  the  lots  in  question.  Mani- 
festly Kane's  equity  is  stronger  than  that  of  Tufts,  and  while  Kane 
is  not  a  party  to  this  action  we  think  that  the  act  of  the  plaintiff 
in  executing  the  release  to  him  is  nothing  more  than  he  could  be 
compelled  to  do,  if  Kane  has  been  made  a  defendant. 

We  think  that  the  case  was  correctly  decided  in  the  court  below, 
and  that  the  judgment  should  be  affirmed  with  costs. 

All  concur. 

Judgment  affirmed. 


MONARCH  COAL  &  MINING  CO.  v.  HAND 

Appellate  Court  of  Illinois,  Third  District,  1901 
(99  III.  App.  322) 

Mr.  Presiding  Justice  Harker  delivered  the  opinion  of  the 
court. 

Appellee  filed  a  bill  to  foreclose  a  mortgage  on  116  acres  of  land, 
executed  by  Jonathan  A.  Emans  and  wife,  on  the  13th  of  Decem- 
ber, 1894,  to  secure  the  payment  of  a  promissory  note  for  $3,500, 
payable  to  appellee.  Emans  and  wife  and  appellant  were  made 
defendants.  The  two  former  were  defaulted,  but  appellant  an- 
swered and  filed  a  cross-bill  setting  up  a  deed  executed  by  Emans 
to  it  on  July  1,  1898,  whereby  he  conveyed  to  appellant  a  small 
part  of  the  land  in  fee  and  the  coal  underlying  the  balance,  and 
asked  that  in  the  decree  foreclosing  the  mortgage,  the  portion  of 


MONARCH    COAL    &    MINING    CO.    I'.    HAND  697 

the  premises  still  remaining  in  Emans  be  first  offered  for  sale  sub- 
ject to  the  right  of  appellant  in  the  premises,  and  that  the  entire 
premises  only  be  offered  for  sale  and  sold  in  the  event  that  the 
interest  still  remaining  in  Emans  should  not  sell  for  a  sum  sufficient 
to  satisfy  the  mortgage  debt.  The  court  sustained  a  demurrer  to 
the  cross-bill  and  after  hearing  the  cause  on  the  original  bill  and 
amended  answer,  rendered  a  decree  of  foreclosure,  finding  there 
was  due  appellee  on  her  mortgage  S3,244;  that  the  conveyance 
from  Emans  to  appellant  was  expressly  subject  to  the  mortgage; 
that  appellant  was  mining  coal  from  the  premises,  therel)y  com- 
mitting waste;  and  that  the  land  was  scant  security  for  the  mort- 
gage debt.  The  court  refused  to  direct  the  land  to  be  offered  for 
sale  in  the  order  requested  by  appellant  and  enjoined  it  from  min- 
ing any  coal  from  it  after  the  expiration  of  forty  days  unless  the 
mortgage  debt  should  be  paid. 

The  leading  question  involved  is  whether  the  court  erred  in 
refusing  to  apply  the  doctrine  of  marshaling  assets  and  decreeing 
that  the  mortgaged  premises  be  first  offered  for  sale  subject  to 
appellant's  right  to  mine  the  coal  as  granted  by  the  conveyance  of 
July  1,  1898.  There  was  no  error  in  sustaining  a  demurrer  to  the 
cross-bill.  Under  the  rules  of  equity  pleading,  a  subsequent  pur- 
chaser or  junior  mortgagee,  who  is  made  a  defendant  in  a  bill  to 
foreclose  the  senior  mortgage,  may,  by  answer,  ask  and  obtain  an 
order  in  the  decree  directing  that  the  mortgaged  premises  be  offered 
for  sale  in  the  inverse  order  of  the  conveyances.  Really,  that  was 
what  was  done  in  this  case,  for  the  amended  answer  asked  for  such 
order. 

To  the  equitable  doctrine  of  marshaUng  assets  between  different 
mortgagees,  judgment  creditors  and  purchasers,  the  courts  of  this 
State  are  firmly  committed.  But  we  do  not  think  that  is  a  proper 
case  for  the  application  of  that  doctrine.  The  conveyance  to 
appellant  expressly  provides  that  it  is  made  "subject  to  a  mort- 
gage to  Jane  Hand  in  the  principal  sum  of  $3,500."  A  purchaser 
having  consented  to  take  a  conveyance  of  real  estate  subject  to  a 
mortgage  upon  it,  must  be  considered  as  consenting  that  his 
part  of  the  land  shall  remain,  pro  rata,  liable  for  the  mortgage  debt. 
Briscoe  et  al.  v.  Power,  47  111.  447;  Boom  et  al.  v.  Clark  et  al,  189 
111.  466.  We  quote  from  the  opinion  of  Justice  Lawrence  in  Briscoe 
et  al.  V.  Power,  supra: 

"We  held  in  the  case  of  Iglehart  v.  Crane  &  Wesson,  42  111.  261, 
that  where  a  mortgagor  sells  the  mortgaged  premises  in  parcels, 
at  successive  periods,  the  different  parcels  should  be  subjected  to 


698      SPECIAL   EQUITIES   COUPLED   WITH   THE   MORTGACxE   RELATION 

the  payment  of  the  mortgage  in  the  inverse  order  of  their  aliena- 
tion. That  rule  rests  upon  the  reason  that  where  the  mortgagor 
sells  a  part  of  the  mortgaged  premises,  without  reference  to  the 
incumbrance  purporting  to  convey  the  fee  simple,  and  retaining  a 
part  himself,  it  is  equitable,  as  between  the  mortgagor  and  his 
grantee,  that  the  part  still  held  by  the  mortgagor  should  be  first 
subjected  to  the  payment  of  the  debt,  and  this  equity  having 
attached  to  the  land,  a  subsequent  purchaser  from  the  mortgagor, 
with  notice,  takes  it  subject  to  the  same  equity.  But  it  is  evident 
that  this  reasoning  has  no  application  to  a  case  like  the  present, 
where  the  first  purchaser  expressly  takes  subject  to  the  mortgage. 
In  such  cases,  the  purchaser  has  no  equity,  as  against  the  mort- 
gagor, that  the  portion  still  held  by  the  latter  shall  be  first  applied 
to  the  payment  of  the  incumbrance,  and  having  no  equity  against 
him,  of  course  has  none  against  his  grantee.  The  first  purchaser, 
by  taking  expressly  subject  to  the  mortgage,  consents  that  the 
land  conveyed  to  him  shall  remain  subject  to  its  pro  rata  share  of 
the  debt." 

It  was  not  error  to  enjoin  appellant  from  further  mining  coal 
from  the  premises  after  forty  days  unless  the  mortgage  debt 
should  be  paid.  The  evidence  tended  to  show  that  the  land  was 
scant  security  for  appellee's  debt,  and  the  court  so  found,  although 
there  was  a  conflict  in  the  testimony  upon  that  point.  Large 
quantities  of  coal  had  already  been  taken  from  the  land  and  a 
continuation  of  the  work  would  depreciate  appellee's  security,  of 
course. 

We  see  no  error  in  the  decree  rendered  and  the  same  will  there- 
fore be  affirmed. 


BOOK  IV 
ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

(a)  Strict  Foreclosure 

4  Kent,  Com.  181.  The  equity  of  redemption  which  exists  in 
the  mortgagor,  after  default  in  payment,  may  l)c  barred  or  fore- 
closed, if  the  mortgagor  continues  in  default  after  due  notice  to 
redeem.  The  ancient  practice  was,  by  bill  in  chancery  to  procure  a 
decree  for  a  strict  foreclosure  of  the  right  to  redeem,  by  which 
means  the  lands  became  the  absolute  property  of  the  mortgagee. 
This  is  the  English  practice  to  this  day,  though  sometimes  the 
mortgagee  will  pray  for,  and  obtain,  a  decree  for  a  sale  of  the 
mortgaged  premises,  under  the  direction  of  an  officer  of  the  court, 
and  the  proceeds  of  the  sale  will,  in  that  case,  be  applied  towards 
the  discharge  of  encumbrances  according  to  priority.  Mondey  v. 
Mondey,  1  Ves.  &  Beame,  223.  The  latter  practice  is  evidently  the 
most  beneficial  to  the  mortgagor,  as  well  as  the  most  reasonable 
and  accurate  disposition  of  the  pledge. 

CLARK  V.  REYBURN 

Supreme  Court  of  United  States,  1808 

(8  Wall.  318) 

Mr.  Justice  Swayne  stated  the  case,  and  delivered  the  opinion 
of  the  court. 

This  is  an  appeal  in  equity.  Reyburn  is  the  complainant. 
Florinda  Clark  and  Few  only  were  made  defendants  by  the  orig- 
inal bill.  She  answered.  Few  filed  a  plea  and  demurred.  On  the 
5th  of  May,  1862,  leave  was  given  to  the  complainant  to  amend 
his  bill,  and  leave  was  given  to  Mrs.  Clark  to  withdraw  her  answer. 
It  had  been  filed  as  her  answer  in  a  former  case,  and  was  refiled 
in  this  case.  The  court  ordered  it  to  be  restored  to  the  files  from 
which  it  had  been  taken.  The  complainant  thereupon  filed  an 
amended  bill  whereby  Jeremiah  Clark  was  brought  into  the  case  as 
a  defendant. 

699 


700     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

The  amended  bill  states  the  following  case : 

That  on  the  30th  of  April,  1859,  Jeremiah  Clark  executed  to  the 
complainant  his  promissory  note  for  $5,250,  payable  twelve 
months  from  date,  with  interest  after  maturity  at  the  rate  of 
twenty-five  per  cent,  per  annum.  On  the  same  day,  Clark  and 
wife  executed  to  the  complainant  a  mortgage  upon  the  real  estate 
therein  described,  conditioned  to  secure  the  payment  of  the  note. 
The  mortgage  was  acknowledged  by  the  grantors,  and  duly  re- 
corded. Clark  failed  to  pay  the  note  at  matui-ity.  The  complain- 
ant, on  the  5th  of  October,  1861,  filed  his  bill  of  foreclosure  against 
the  same  parties  who  are  defendants  in  this  suit.  Before  the  hear- 
ing, the  bill  was  dismissed  as  to  Mrs.  Clark  and  Few.  It  was 
adjudged  and  decreed  that  there  was  due  from  Jeremiah  Clark 
$8,565.77;  that  he  should  be  forever  barred  and  foreclosed  of  any 
interest  in  the  mortgaged  premises,  and  that  they  should  be  sold 
by  the  marshal,  and  the  proceeds  applied  to  the  payment  of  the 
amount  found  due.  On  the  27th  of  December,  1861,  the  marshal 
sold  the  premises  to  the  complainant  for  $7,000,  and  on  the  23d 
of  that  month  executed  to  him  a  deed  for  the  property.  That 
there  was  still  due  to  the  complainant  upon  the  decree  the  sum  of 
$1,884.25,  for  the  payment  of  which,  the  interest  of  Florinda 
Clark  in  the  mortgaged  premises  is  chargeal)le.  That  the  defend- 
ant, F  ew,  under  a  deed  from  Clark  and  wife  to  him  in  trust,  claims 
to  have  the  interest  of  a  trustee  in  the  property,  which  interest 
accrued  subject  to  his  mortgage.  The  prayer  of  the  bill  is  for  a 
decree  of  foreclosure  as  to  the  interest  of  Florinda  Clark  and  Few 
in  the  mortgaged  premises,  and  for  general  relief. 

Few  filed  an  answer  which  sets  forth,  that  about  the  12th  of 
January,  1860,  Clark  and  wife  executed  to  him,  in  trust,  a  deed 
for  the  same  premises  described  in  the  mortgage ;  that  the  persons 
for  whose  benefit  the  deed  was  made  were  Florinda  Clark,  the  wife 
of  Jeremiah  Clark,  and  their  children,  then  born  and  thereafter 
to  be  born,  and  the  lawful  heirs  of  such  children,  with  certain. 
limitations  as  to  the  further  disposition  of  the  property  as  set  forth 
in  the  deed,  a  copy  of  which  it  is  stated  is  annexed  to  the  answer 
of  Mrs.  Clark  to  the  amended  bill  in  this  case.  As  to  all  the  other 
matters  set  forth  in  the  bill,  he  avers  that  he  had  no  knowledge, 
and  he  disclaims  all  interest  in  the  matter  in  controversy,  except 
as  such  trustee.  He  prays  that  the  court  will  adjudge  fairly  be- 
tween the  parties  in  interest,  and  that  he  may  be  dismissed  with 
costs. 

Clark  and  wife  failed  to  answer.    The  trust  deed  referred  to  in 


CLARK    V.    REYBURN  701 

the  answer  of  Few,  as  made  a  part  of  the  answer  of  Mrs.  Clark, 
is  not  in  the  record.  No  replication  was  filed  by  the  complainant, 
and  no  testimony  was  taken  upon  either  side.  The  bill  was  taken 
pro  confesso  as  to  Clark  and  wife,  and  the  case  stood  upon  the  bill 
and  answer  as  to  Few. 

The  court  decreed  that  all  the  defendants  should  be  forever 
barred  and  foreclosed  of  their  right  of  redemption  in  the  mort- 
gaged premises.  The  decree  does  not  find  either  the  fact  or  the 
amount  of  the  alleged  indebtedness.  It  is  silent  upon  the  subject. 
The  record  shows  no  proceeding  in  relation  to  it.  No  time  was 
given  either  to  Mrs.  Clark  on  her  trustee  within  which  to  pa}'-  and 
redeem.  The  foreclosure  was  unconditional,  and  was  made  ab- 
solute at  once.     The  appeal  is  prosecuted  to  reverse  the  decree. 

In  our  view  of  the  case  it  will  be  sufficient  to  consider  one  of  the 
numerous  objections  insisted  upon  by  the  counsel  for  the  appel- 
lants. 

The  sale  and  conveyance  by  the  marshal  transferred  the  entire 
interest  of  Jeremiah  Clark  in  the  mortgaged  premises  to  Reyburn, 
but  it  did  not  in  any  wise  affect  the  equity  of  redemption  which 
had  been  vested  in  Few  by  the  trust  deed  of  Clark  and  wife  to  him. 
Childs  V.  Childs  et  al.,  10  Ohio  St.  339.  The  equity  of  redemption 
would  have  been  barred  and  extinguished  by  the  decree  which 
ordered  the  premises  to  be  sold  if  the  proper  parties  had  been  be- 
fore the  court  when  it  was  made.  The  bill  in  that  case  having 
been  dismissed  as  to  Mrs.  Clark  and  Few,  the  proceedings  left 
their  rights  in  full  force.  They  were  before  the  court  in  the  case 
now  under  consideration,  and  the  trust  estate  was  for  the  first 
time  liable  to  be  affected  by  its  action.  If  there  was  a  balance  of 
the  debt  secured  by  the  mortgage  still  unpaid,  they  were  properly 
proceeded  against,  and  the  complainant  was  entitled  to  relief. 
The  question  to  be  considered  relates  to  the  character  of  the  de- 
cree. 

Can  a  decree  of  strict  foreclosure,  which  does  not  find  the  I 
amount  due,  which  allows  no  time  for  the  payment  of  the  debt  | 
and  the  redemption  of  the  estate,  and  which  is  final  and  conclusive  \ 
in  the  first  instance,  be  sustained?  J 

The  equity  of  redemption  is  a  distinct  estate  from  that  which 
is  vested  in  the  mortgagee  before  or  after  condition  broken.  It  is  j 
descendible,  devisable,  and  alienable  like  other  interests  in  real 
property.  1  Powell  on  Mortgages,  252;  2  Greenleaf's  Cruise,  128. 
As  between  the  parties  to  the  mortgage  the  law  protests  it  with 
jealous  vigilance.    It  not  only  applies  the  maxim  "  once  a  mortgage 


702     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

always  a  mortgage,"  but  any  limitation  of  the  right  to  redeem, 
as  to  time  or  persons,  by  a  stipulation  entered  into  when  the  mort- 
gage is  executed,  or  afterwards,  is  held  to  be  oppressive,  contrary  to 
pubHc  policy,  and  void.  By  the  common  law,  when  the  condition 
of  the  mortgage  was  broken,  the  estate  of  the  mortgagee  became 
indefeasible.  At  an  early  period  equity  interposed  and  permitted 
the  mortgagor,  within  a  reasonable  time,  to  redeem  upon  the  pay- 
ment of  the  amount  found  to  be  due.  The  debt  was  regarded  by 
the  chancellor,  as  it  has  been  ever  since,  as  the  principal,  and  the 
mortgage  as  only  an  accessory  and  a  security.  The  doctrine  seems 
to  have  been  borrowed  from  the  civil  law.  2  Greenleaf's  Cruise, 
77-78;  Spence's  Equity  Jurisdiction,  601-603.  After  the  prac- 
tice grew  up  of  applying  to  the  chancellor  to  foreclose  the  right  to 
redeem  upon  default  in  the  payment  of  the  debt  at  maturity,  it 
was  always  an  incident  of  the  remedy  that  the  mortgagor  should  be 
allowed  a  specified  time  for  the  pa^inent  of  the  debt.  This  was 
fixed  by  the  primary  decree,  and  it  might  be  extended  once  or 
oftener,  at  the  discretion  of  the  chancellor,  according  to  the  cir- 
cumstances of  the  case.  It  was  only  in  the  event  of  final  default 
that  the  foreclosure  was  made  absolute. 

In  this  country  the  proceeding  in  most  of  the  States,  and  per- 
haps in  all  of  them,  is  regulated  by  statute.  The  remedy  thus  pro- 
vided when  the  mortgage  is  executed  enters  into  the  convention  of 
the  parties,  in  so  far  that  any  change  by  legislative  authority  which 
affects  it  substantially,  to  the  injury  of  the  mortgagee,  is  held  to 
be  a  law  "impairing  the  obligation  of  the  contract"  within  the 
meaning  of  the  provision  of  the  Constitution  upon  the  subject. 
Bronson  v.  Kinzie,  1  Howard,  311;  Williamson  v.  Doe,  7  Blackford, 
13. 

At  the  date  of  the  execution  of  this  mortgage  the  act  of  the  terri- 
torial legislature  of  Kansas  of  1855,  "concerning  mortgages," 
was  in  force.  It  directed  that  in  suits  upon  mortgages  the  mort- 
gagee should  recover  a  judgment  for  the  amount  of  his  debt,  "to 
be  levied  of  the  mortgaged  property,"  and  that  the  premises  should 
be  sold  under  a  special  fieri  fadas.  But  it  also  provided  that  noth- 
ing contained  in  the  act  should  be  so  construed  as  to  "prevent 
a  mortgagee,  or  his  assignee  or  the  representative  of  either,  from 
proceeding  in  a  court  of  chancery  to  foreclose  a  mortgage  accord- 
ing to  the  course  of  proceeding  in  chancery  in  such  cases."  Statutes 
of  Kansas  of  1855,  p.  509.  This  gave  to  the  complainant  in  the 
case  before  us  the  option  to  proceed  in  either  way.  He  elected 
to  file  a  bill  in  equity.    No  rule  of  practice  bearing  upon  the  sub- 


CLARK    V.    REYBURN  703 

ject,  established  by  the  court  below,  has  been  bi'ought  to  our  at- 
tention. 

The  90th  rule  of  equity  practice  adopted  by  the  Supreme  Court, 
directs  that  where  no  rule  prescribed  by  this  court,  or  by  the  Cir- 
cuit Court,  is  applicable,  the  practice  of  the  Circuit  Court  shall  be 
regulated  by  the  practice  of  the  High  Court  of  Chancery  in  England, 
so  far  as  it  can  be  applied  consistently  with  the  local  circumstances 
and  convenience  of  the  district  where  the  court  is  held. 

The  equity  spoken  of  in  the  Process  Act  of  1792,  is  the  equity 
of  the  English  chancery  system.  Robinson  v.  Campbell,  3  Wheaton, 
212;  Boyle  v.  Zacharie,  6  Peters,  648. 

Spence  says:  "At  length,  in  the  reign  of  Charles  I,  it  was  es- 
tablished that  in  all  cases  of  mortgages,  where  the  money  was  ac- 
tually paid  or  tendered,  though  after  the  day,  the  mortgage  should 
be  considered  as  redeemed  in  equity  as  it  would  have  been  at  law 
on  payment  before  the  day;  and  from  that  time  bills  began  to  be 
filed  by  the  mortgagees  for  the  extinction  or  foreclosure  of  this 
equity,  unless  payment  were  made  by  a  short  day,  to  be  named.'' 
Equity  Jurisdiction,  603. 

The  settled  English  practice  is  for  the  decree  to  order  the  amount 
due  to  be  ascertained,  and  the  costs  to  be  taxed;  and  that  upon  the 
payment  of  both  within  six  months,  the  plaintiff  shall  reconvey 
to  the  defendant;  but  in  default  of  payment  within  the  time  lim- 
ited, "that  the  said  defendant  do  stand  absolutely  debarred  and 
foreclosed  of  and  from  all  equity  of  redemption  of  and  in  said  mort- 
gaged premises."  2  Daniels'  Chancery  Practice,  1016;  1  Seton 
on  Decrees,  346.  We  have  been  able  to  find  no  English  case 
where,  in  the  absence  of  fraud,  a  time  for  redemption  was  not 
allowed  by  the  decree.  The  subject  was  examined  by  Chancellor 
Kent,  with  his  accustomed  fulness  of  research.  He  came  to  the 
conclusion  that  the  time  was  in  the  discretion  of  the  chancellor, 
and  to  be  regulated  by  the  circumstances  of  the  particular  case; 
but  he  nowhere  intimates  that  such  an  allowance  could  be  entirely 
withheld.  Ferine  v.  Dunn,  4  Johnson's  Chancery,  140.  The 
practice  in  Illinois  is  in  conformity  to  these  views.  Johnson  v. 
Donnell,  15  Illinois,  97.  In  the  light  of  these  authorities  we  are 
constrained  to  hold  the  decree  in  the  case  before  us  fatalh"  defec- 
tive. 

The  decree  is  reversed,  and  the  cause  will  be  remanded  to  the 
court  below  for  further  proceedings, 

In  conformity  to  this  opinion. 


704     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

(6)  Foreclosure  by  Entry 

BOYD  V.  SHAW 

Supreme  Juducial  Court  of  Maine,  1836 

(14  Me.  58) 

This  was  a  bill  in  equity,  and  was  heard  on  bill,  answer,  and 
proof.  The  bill  alleged,  that  William  Boyd  was  seized  of  a  tract 
of  land  in  Bangor,  and  on  the  3d  of  December,  1813,  mortgaged  the 
same  to  the  defendant,  to  secure  the  sum  of  $286.37,  payable  in 
six  months,  with  interest;  and  that  on  the  8th  of  August,  1815, 
the  said  William  Boyd  made  a  second  mortgage  of  the  same  land 
to  Philip  Coombs  and  Richard  Pike,  to  secure  the  payment  to 
them  of  the  sum  of  $321.59  in  one  year  with  interest;  that  on  the 
4th  of  June,  1835,  Coombs  and  the  administratrix  of  Pike  assigned 
their  mortgage  to  the  plaintiff;  that  the  plaintiff,  as  assignee 
of  the  Coombs  &  Pike  mortgage,  on  the  seventh  of  the  same  June, 
tendered  to  Shaw  the  amount  due  on  his  mortgage  to  redeem  the 
same;  and  that  Shaw  refused  to  receive  the  money,  or  give  a 
quitclaim  deed,  and  wholly  denied  any  right  to  redeem. 

The  answer  denied  that  any  right  of  redemption  existed  at  the 
time  of  the  alleged  tender;  that  on  the  9th  of  April,  1816,  "he 
entered  upon  the  premises  and  took  peaceable  possession  thereof 
according  to  law,  by  virtue  of  said  mortgage  deed,  and  for  the  ex- 
press purpose  of  foreclosing  the  right  in  equity  of  redeeming  the 
same,  and  that  said  William  Boyd  was  then  present,  and  had  full 
knowledge  of  such  entry  to  foreclose,  and  gave  his  written  assent 
thereto;"  that  he  has  ever  since,  by  himself  and  tenants,  peaceably, 
openly,  and  exclusively  occupied,  possessed,  and  improved  the 
same;  and  that  the  said  Coombs,  Pike,  and  Robert  Boyd  well 
knew  the  same.  The  defendant  also  set  up  title  to  the  premises,  by 
virtue  of  a  Collector's  sale  for  the  payment  of  taxes;  but,  as  this 
part  of  the  case  is  not  noticed  in  the  opinion  of  the  Court,  any 
reference  to  it  has  become  unnecessary.  The  facts  in  the  case 
sufficiently  appear  in  the  opinion  of  the  Court. 

Weston,  C.  J. — The  principal  question  submitted  to  us  is, 
whether  there  has  been  a  foreclosure  of  the  mortgage,  executed 
by  WiUiam  Boyd,  from  whom  both  parties  claim,  to  the  defendant. 
From  the  date  of  that  mortgage,  which  was  in  December,  1813, 


BOYD    V.    SHAW  705 

until  1821,  when  the  statutes  were  revised,  the  rights  of  the  par- 
ties are  to  be  determined  by  the  laws  of  Massachusetts,  then  exist- 
ing. By  the  statute  of  1785,  ch.  22,  1  Mass.  Laws,  251,  all  real 
estates  pledged  or  mortgaged  are  declared  redeemable,  unless  the 
mortgagee,  or  person  claiming  under  him,  hath  by  process  of  law, 
or  by  open  and  peaceable  entry,  made  in  the  presence  of  two  wit- 
nesses, taken  actual  possession  thereof,  and  continued  that  posses- 
sion peaceably  three  years.  By  the  additional  statute  of  1798, 
ch.  77,  2  Mass.  Laws,  853,  it  is  provided,  that  where  the  mortgagee 
has  lawfully  entered,  and  obtained  the  actual  possession  of  the 
mortgaged  premises,  for  condition  broken,  the  mortgagor  shall 
have  a  right  to  redeem  the  same,  within  three  years  next  after 
such  possession  obtained,  and  not  afterwards.  And  a  process  is 
provided  by  a  bill  in  equity,  whereby  upon  payment  or  tender 
made,  within  the  period  limited,  he  is  to  be  restored  to  the  enjoy- 
ment of  the  premises. 

It  is  contended,  that  by  lawful  entry  under  the  last  statute, 
must  be  understood  one  made  peaceably,  in  the  presence  of  two 
witnesses,  or  obtained  by  process  of  law,  according  to  the  provi- 
sions of  the  former  statute.  There  does  not  seem  to  be  any  suffi- 
cient reason,  why  the  term,  "lawful  entry,"  should  receive  so  nar- 
row a  construction.  Any  peaceable  entry  made  by  the  mortgagee, 
upon  a  surrender  to  him  of  the  premises,  or  otherwise,  would  be 
lawful. 

These  statutes  have  frequently  been  under  consideration  in  the 
Supreme  Court  of  Massachusetts.  In  Earskine  v.  Townsend,  2 
Mass.  R.  493,  it  was  stated  by  the  Court,  that  if  the  mortgagee 
shall  lawfully  enter  and  take  possession,  after  condition  broken, 
the  three  years  will  commence  from  the  time  of  such  entry.  But 
if  he  have  entered  before,  they  do  not  commence,  until  he  shall 
have  given  notice  to  the  mortgagor,  after  condition  broken,  that 
he  holds  for  that  cause.  What  shall  constitute  a  lawful  entry  is 
not  defined,  but  a  mode  of  foreclosure  is  expressly  recognized,  not 
pointed  out  by  the  first  statute,  namely,  by  notice  to  the  mortgagor. 
Neirnll  et  al.  v.  Wright,  3  Mass.  R.  138,  has  the  same  doctrine. 
Parsons,  C.  J.,  there  says  "when  the  mortgagor  enters  after  con- 
dition broken,  the  three  years  commence  on  that  entry." 

In  Taylor  v.  Weld  et  al.,  5  Mass.  R.  109,  it  was  stated  bj"-  Sedg- 
wick, J.,  who  delivered  the  opinion  of  the  Court,  that  an  entr>', 
after  condition  broken,  shall  be  understood  to  be  for  that  cause. 
In  that  case  it  was  held  by  the  Court,  under  the  statute  of  1789, 
ch.  77,  that  the  three  years  begin  to  run,  from  the  time  the  mort- 


706     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

gagee  shall  have  made  lawful  entry  for  condition  broken;  and  that 
to  effect  a  foreclosure,  it  was  no  longer  necessary,  as  was  required 
by  the  former  statute,  that  he  should  enter  by  process  of  law, 
or  make  open  and  peaceable  entry  in  the  presence  of  two  witnesses. 
In  Pomeroy  v.  Winship,  12  Mass.  514,  Parker,  C.  J.,  says,  "It  has 
already  been  decided  that,  where  the  mortgagee  shall  enter  after 
condition  broken,  it  shall  be  presumed  that  he  entered  for  that 
cause;  and  the  time  for  foreclosure  shall  run  from  that  entry." 
The  generality,  however,  of  this  intimation  has  been  modified  by 
subsequent  decisions. 

In  Thayer  et  al.  v.  S^nith,  17  Mass.  R.  429,  the  court  held,  that 
the  entry  must  be  open  and  peaceable  and  actual  possession  taken, 
that  the  mortgagor  may  know  when  the  three  years  commence, 
beyond  which  his  right  to  redeem  will  cease;  and  that  nothing  short 
of  actual  notice  to  the  mortgagor  will  supply  the  want  of  a  con- 
tinued possession.  The  same  doctrine  was  laid  down  in  Gibson  v. 
Crehore,  5  Pick.  146,  and  in  Hadley  et  ux.  v.  Houghton,  7  Pick.  29. 

We  are  warranted  then  in  deducing  from  the  law  of  Massachu- 
setts, as  settled  by  judicial  construction,  that  to  effect  a  foreclo- 
sure by  proceedings  in  pais,  the  mortgagee  is  to  make  lawful 
entry  for  condition  broken,  of  which  the  parties  to  be  affected  must 
have  actual  or  implied  notice;  and  that  notice  is  to  be  implied  from 
a  subsequent  continued  possession. 

The  entry  of  the  mortgagee  proved  in  this  case,  was  after  con- 
dition broken.  The  defendant  entered  lawfully  for  that  cause 
and  for  the  purpose  of  foreclosure,  as  appears  by  the  consent  in 
writing  of  William  Boyd,  the  mortgagor,  who  had  continued  in 
possession  up  to  that  period.  From  that  time,  Boyd  considered 
the  land  the  property  of  the  defendant,  and  his  right  was  frequently 
recognized  by  Coombs,  who  became  second  mortgagee  jointly 
with  Pike.  The  first  mortgage  was  recorded ;  Coombs  knew  of  its 
existence;  and  Boyd,  who  was  left  in  possession,  and  who  acknowl- 
edged under  his  hand  the  entry  of  the  defendant  for  condition 
broken,  was  for  many  years  his  near  neighbor.  Coombs  found 
that  the  defendant  had  taken  possession,  after  the  date  of  the 
second  mortgage  to  him. 

He  now  states,  that  he  neither  knew  or  suspected  that  he  did  so 
for  the  purpose  of  foreclosure.  It  is  somewhat  remarkable,  that 
interested  as  he  was  in  the  property,  such  a  suspicion  should  not 
have  entered  his  mind,  during  the  years  that  the  mortgagee  had 
the  possession  and  control  of  the  land  by  his  agents.  If  he  had 
given  himself  the  trouble  to  inquire,  he  might  have  ascertained  the 


BOYD    V.    SHAW  707 

fact  from  his  neighbor  Boyd,  the  mortgagor.  If  he  did  not  know 
when  the  first  mortgage  was  payable,  he  might  have  known  upon 
inquiry;  which  as  second  mortgagee  he  was  bound  to  make,  the  note 
being  referred  to  in  the  first  deed  of  mortgage,  which  was  duly 
recorded. 

He  stated  to  Jason  Comings,  in  1828,  that  he  had  occupied  the 
land  for  paying  the  taxes  a  few  j^ears,  under  the  defendant.  It 
appears,  both  from  the  testimony  of  Comings  and  of  John  Bcnnock, 
the  agent  of  the  defendant,  that  about  that  time  Coombs  applied 
to  him  to  hire  the  land,  claiming  a  preference  from  his  former 
occupancy;  and  because  it  was  contiguous  to  his  own  land.  And 
he  was  accordingly  permitted  to  continue  his  occupancy.  In  his 
communications  with  Bennock,  he  uniformly  spoke  of  this  land  as 
belonging  to  the  defendant.  It  appears  that  he  repeatedly  pro- 
posed to  buy  it;  and  that  he  had  once  or  twice  offered  for  it,  to  the 
defendant  or  his  agents,  a  sum  exceeding  the  amount  originally 
due  to  the  defendant  with  the  interest. 

It  has  been  satisfactorily  established  in  proof,  that  in  1816, 
the  defendant  made  peaceable  and  lawful  entry  into  the  premises 
for  condition  broken.  That  for  several  years  prior  to  1828,  and  for 
several  years  afterwards,  being  more  than  three  years  in  the 
whole,  he  was  in  the  continued  possession  by  his  agent,  or  by  his 
tenant,  Coombs.  The  entry  and  possession  of  the  mortgagee, 
after  and  for  condition  broken,  is  implied,  if  not  actual,  notice  to 
all  persons  interested  in  the  equity  of  redemption.  But  if  it  is 
incumbent  upon  the  defendant  to  prove  affirmatively  notice  of  his 
entry  to  the  second  mortgagee,  it  is  abundantly  proved  that  Coombs 
had  such  notice;  and  he  ought  to  have  known,  and  might  have 
known,  that  it  was  for  condition  broken.  And  the  plaintiff  is 
affected  with  this  notice,  holding  as  he  does  under  Coombs,  by 
deed  dated  a  few  days  only  before  the  commencement  of  this  suit. 

From  the  facts  in  the  case,  we  are  satisfied  that  the  right  to 
redeem,  now  attempted  to  be  asserted,  was  foreclosed  prior  to  1821, 
under  the  laws  of  Massachusetts.  The  defendant  had  lawfully 
entered  and  taken  possession  for  condition  broken,  by  the  consent 
in  writing  of  the  mortgagor,  Boyd,  who  was  then  in  the  actual 
possession,  with  the  equitable  right  to  redeem  from  both  the  in- 
cumbrancers. The  second  mortgagee  became  the  tenant  of  the 
'defendant  for  more  than  three  years  since  the  revised  statute  of 
1821,  fully  acknowledging  the  defendant's  title.  If  then  the 
equity  was  not  foreclosed  before,  as  we  think  it  was,  if  the  case 
required  it,  there  is  much  reason  to  hold,  that  there  may  have  been 


708     ENFORCEMENT  OK  THE  MORTGAGE  BY  MORTGAGEE 

a  foreclosure  under  the  statute  of  this  State.  But  upon  this  point 
we  give  no  decided  opinion.  The  entry  of  the  defendant  for 
condition  broken,  having  been  lawfully  made  prior  to  1821,  the 
law  of  Massachusetts  must  govern  the  case. 

It  has  been  contended  in  argument,  that  the  right  to  redeem  is 
a  favored  claim.  But  the  extent  and  limit  of  the  favor  due  to  it, 
have  been  fixed  by  law.  This  we  are  not  at  liberty  to  transcend. 
It  is  very  manifest,  that  the  movement  to  redeem  had  its  origin 
in  the  very  great  and  sudden  appreciation  of  the  land  in  value. 
The  plaintiff's  grantor,  a  man  of  ample  means,  had  slumbered 
upon  the  claim  now  set  up,  for  twenty  3^ears.  He  was  under  no 
obligation  to  pay  the  debt  due  to  the  defendant.  For  the  greater 
part  of  that  period,  it  was  doubtful  whether  the  value  of  the  land 
was  equal  to  that  debt.  If  it  had  depreciated,  the  loss  would  have 
fallen  upon  the  defendant;  and  it  is  but  just  that  the  chance  of 
pain  should  be  accorded  to  him,  who  runs  the  hazard  of  the  loss. 

Bill  dismissed.^ 


THOMPSON  ?;.  KENYON 

Supreme  Judicial  Court  of  Massachusetts,  1868 

(100  Mass.  108) 

Bill  in  Equity  to  redeem  real  estate  from  a  mortgage  given  by 
the  plaintiff  to  David  Hey  wood.  Answer,  that  the  right  of  re- 
demption was  foreclosed.  Issue  was  joined  on  the  answer,  and  a 
hearing  had  before  Colt,  J.,  who  reserved  the  case  for  the  determi- 
nation of  the  full  court  on  a  report  of  which  the  following  is  the 
material  part: 

"It  appeared  that  the  mortgage  was  given  by  the  plaintiff 
June  25.  1850,  and  assigned  by  Heywood  to  Jonathan  Fawcett 
May  24,  1851.  To  prove  a  foreclosure  the  defendant  relied  upon  a 
certificate  indorsed  upon  the  back  of  the  mortgage  deed  as  follows : 

"'I,  Jonathan  Fawcett,  the  assignee  of  the  mortgage,  the  con- 
ditions of  the  within  mortgage  being  broken,  this  day  entered  upon 
the  premises  and  took  peaceable  possession  for  conditions  broken, 
and  for  the  purpose  of  foreclosing  this  mortgage. 

"  'Jonathan  Fawcett. 

iSee  also,  Ladd  v.  Putnam,  79  Me.  568  (1887). 


THOMPSON    v.    KEXYOX  709 

'"We,  the  inidersigned,  hereby  certify  and  swear  that  Jonathan 
Fawcett,  the  assignee  of  the  within  niortfi;age,  this  day  entered 
upon  the  premises  descril)ed  and  referred  to  in  the  within  deed, 
and  then  in  our  presence  declared  that  he  took  peaceable  posses- 
sion of  the  premises  for  conditions  broken  and  for  the  purpose  of 
foreclosing  the  mortgage.  Witness  our  hands  and^seals,  the  lit!'. 
<lay  of  April,  1857. 

'"In  presence  of  Edwin  R.  Walker.    [Seal.] 

Israel  Cutting,  his 

Charles  Hersey.  Elgin  X   Barker.     [Seal.] 

mark. 

'"Sworn  to  before  me,  Charles  Hersey,  Just.  Peace.' 

"This  certificate  was  duly  recorded;  and  was  held  by  me.  it 
followed  by  the  statute  possession,  to  be  legally  sufficient  to  fore- 
close said  mortgage.  The  plaintiff  remained  in  actual  occupation 
of  the  premises  from  the  date  of  the  entry  by  Fawcett  until  the 
date  of  the  conveyance  by  Fawcett  to  the  defendant;  but  there 
was  no  evidence  that  his  occupation  was  not  in  subordination  to 
Fawcett's  title  under  the  mortgage.  After  the  conveyance  to  the 
defendant,  the  plaintiff  occupied  a  part  of  the  premises  under  the 
defendant.  The  plaintiff  filed  a  bill  April  10,  1860,  against  said 
Fawcett,  to  redeem  the  premises,  which  was  duly  served,  but  no 
appearance  was  entered  by  Fawcett  and  no  further  proceedings 
were  had  therein,  and  the  suit  was  entered  'neither  part^-,'  at 
April  term  1861,  at  the  instance  of  the  plaintiff.  Fawcett  conveyed 
the  mortgaged  premises  to  the  defendant  October  29,  1860,  by 
quitclaim  deed  in  the  ordinary  form,  duly  recorded.  The  con- 
sideration for  this  conveyance  was  the  amount  due  on  the  mortgage, 
principal  and  interest,  which  was  then  paid  by  the  defendant. 
At  the  same  time,  the  mortgage  note  was  indorsed  to  the  defendant 
without  recourse.  At  the  time  of  the  conveyance  from  Fawcett, 
the  defendant  held  a  second  mortgage  on  the  premises,  given  by 
the  plaintiff,  dated  February  26,  1855,  and  duly  recorded. 

"  The  plaintiff,  in  avoidance  of  the  alleged  foreclosure,  contended, 
1,  That,  after  the  expiration  of  the  three  years  for  redemption, 
but  during  the  pendency  of  the  bill  to  redeem  of  Fawcett.  the  de- 
fendant took  up  the  first  mortgage  at  the  plaintiff's  request,  and 
agreed  with  him  at  the  time  of  the  conveyance  from  Fawcett 
to  allow  further  time  for  redemption;  2,  that  such  agreement  to 
extend  the  time  of  redemption  was,  at  all  events,  made  by  the  de- 
fendant before  said  bill  to  redeem  was  dismissed;  and  3,  that  at 
the  time  of  Fawcett's  deed  the  defendant  had  actual  knowledge  of 


710     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

the  attempted  foreclosure,  and  also  of  the  pendency  of  the  bill 
to  redeem.  The  defendant  denied  each  of  these  allegations;  and 
there  was  much  conflict  of  evidence  under  them.  The  plaintiff 
contended  that  the  burden  of  proof  to  establish  the  foreclosure  was 
upon  the  defendant;  and  I  so  ruled.  But  I  was  of  opinion  that  the 
burden  of  establishing  the  above  propositions  was  upon  the  plain- 
tiff; and  upon  the  whole  evidence  was  not  satisfied  that  either  of 
the  propositions  was  proved.  The  plaintiff,  notwithstanding,  in- 
sisted that  upon  the  uncontroverted  facts  he  was  still  entitled  to 
redeem." 

Foster,  J.  Under  the  statutes  providing  for  the  foreclosure  of  a 
mortgage  by  open  and  peaceable  entry  on  the  mortgaged  premises 
and  possession  thereof  continued  peaceably  for  three  years,  an 
entry  is  peaceable  if  not  opposed  by  the  mortgagor  or  person  claim- 
ing the  premises,  and  sufficiently  open  if  made  in  the  presence  of 
two  competent  witnesses  whose  certificate  thereof  is  sworn  to  and 
duly  recorded  within  thirty  days  in  the  registry  of  deeds  for  the 
county  where  the  land  lies.  Gen.  Sts.  c.  140,  §§  1,  2.  The  certif- 
icate is  not  in  terms  required  to  state  that  the  entry  was  open; 
and  it  is  enough  that  it  states  in  the  present  case  that  it  was  in  the 
presence  of  the  two  witnesses.  The  signature  of  a  marksman  was 
sufficient  in  this  case,  as  in  all  others,  even  the  attestation  of  a 
will. 

The  mortgagor,  the  plaintiff,  just  before  the  three  years'  pos- 
session expired,  filed  a  bill  to  redeem  against  Fawcett,  the  assignee 
of  the  mortgagee,  and  the  one  by  whom  the  entry  had  been  made; 
pending  this  bill  Fawcett  assigned  his  interest  to  the  defendant  by 
quitclaim  deed;  subsequently  that  suit  was  abandoned  by  the 
entry  of  "neither  party."  The  conveyance  pendente  lite  did  not 
affect  the  suit  in  equity  to  redeem.  When  that  was  discontinued, 
the  defendant  succeeded  to  all  Fawcett's  rights,  and  held  the  estate 
by  an  indefeasible  title  under  a  completed  foreclosure.  We  dis- 
cover no  foundation  for  the  suggestion  that  Fawcett's  conveyance 
to  the  defendants  was  a  release  either  of  the  mortgage  or  its  fore- 
closure. It  was  an  assignment  of  the  mortgage,  and  of  all  Fawcett's 
rights  under  it. 

The  certificate  of  the  entry  is  made  by  statute  evidence  of  the 
fact.    Oakham  v.  Rutland,  4  Gush.  172. 

Bill  dismissed.^ 

1  And  see,  Thompson  v.  Ela,  58  N.  H.  490  (1878). 


VERY    V.    RUSSELL  711 

(c)  Foreclosure  under  Power  of  Sale 

VERY  V.   RUSSELL 

Supreme  Court  of  New  Hampshire,  1874 

(65  N.  H.  646) 

Trespass  qu.  d.  The  parties  agreed  upon  the  following  facts 
for  the  opinion  of  the  court : 

October  29,  1863,  the  plaintiff,  being  the  owner  of  the  locus  in 
quo,  made  a  mortgage  thereof  to  one  Cole,  in  which  her  husband 
joined,  to  secure  a  note  for  $1,000.  Immediately  succeeding  the 
condition  in  the  mortgage  was  the  following:  "And  it  is  agreed  that 
on  failure  of  performance  of  said  condition,  the  said  John  Cole 
may  advertise  said  mortgaged  premises  for  sale,  by  publication  of 
notice  in  some  newspaper  printed  at  Keene,  in  said  county,  three 
weeks  successively  before  such  sale,  and  may  sell  the  same  at  public 
auction  to  the  highest  bidder;  and  his  deed  thereof,  in  pursuance 
of  such  sale,  shall  convey  to  the  purchaser  an  indefeasible  title 
to  the  same,  discharged  of  all  rights  of  redemption  by  the  mort- 
gagors or  any  person  claiming  under  them.  And  the  mortgagee 
shall  apply  the  proceeds  of  said  sale  in  payment  of  said  mortgage 
debt,  and  pay  over  the  balance,  if  any,  to  the  mortgagors,  after 
deducting  the  expense  of  notice  and  sale." 

Payment  not  being  made  according  to  the  condition  of  the  mort- 
gage. Cole  caused  the  premises  to  l^e  advertised  and  sold  in  ac- 
cordance with  the  above  stipulation  in  the  mortgage.  The  sum 
for  which  the  premises  sold  was  less  than  the  amount  then  due  on 
the  mortgage.  One  Shaw,  the  agent  and  attorney  of  Cole,  bid 
off  the  premises  at  the  auction,  but  he  was,  in  fact,  acting  for  Cole 
in  the  business.  Afterwards,  Cole,  by  quitclaim  deed,  conveyed 
the  premises  to  Shaw,  and  Shaw  thereupon,  for  a  valuable  consider- 
tion,  conveyed  them  to  the  defendant.  The  defendant  subse- 
quently went  upon  the  land  and  cut  wood  and  timber,  for  which 
acts  this  suit  is  brought. 

Foster,  J.  The  defendant  claims  title  to  the  premises  and 
property,  which  are  the  subject  of  the  alleged  trespass,  by  virtue 
of  a  valid  execution  of  the  power  of  sale  contained  in  the  plaintiff's 
mortgage  to  Cole. 

The  validity  of  such  powers  is  very  generally,  if  not  universally. 


712     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

recognized  and  declared  by  the  text  writers  on  both  sides  of  the 
Atlantic,  who  adduce  abundant  authorities  in  support  of  their 
propositions.  The  doctrine  seems  to  rest  upon  a  principle  no  less 
broad  and  fundamental  than  the  right  of  parties  to  make  for  them- 
selves such  legal  contracts  as  they  choose.  1  Wash.  R.  P.  498, 
and  cases  cited. 

In  Bell  V.  Twilight,  22  N.  H.  500,  515,  Perley,  J.,  says,— "It 
may  admit  of  doubt  whether  such  powers  to  sell,  granted  in  mort- 
gages, are  valid  under  our  statutes,  which  define  and  fix  the  right 
of  redemption,  and  provide  easy  and  prompt  methods  of  fore- 
closure." But  we  are  unable  to  see  upon  what  ground,  in  the 
absence  of  legislative  prohilntion,  the  court  can  put  a  restriction 
upon  the  freedom  of  the  citizen  to  contract  for  the  sale  of  his  land, 
upon  terms  and  in  a  mode  stipulated  in  a  mortgage,  any  more  than 
upon  his  liberty  to  contract  for  its  sale  in  any  other  way,  or  by 
stipulations  contained  in  any  other  instrument. 

The  validity  of  such  a  power  has  been  very  generally  affirmed 
in  the  other  states  of  the  Union.  It  is  recognized  in  every  other 
New  England  state,  although  in  no  one  of  them  is  it  declared  by 
express  statute.  Rhode  Island  and  Massachusetts  make  statutory 
recognition  of  it,  the  latter  by  prescribing  regulations  for  the  pro- 
ceedings at  such  sale,  and  the  former  by  declaring  that  at  an  auc- 
tion sale  under  a  power  contained  in  the  mortgage  the  mortgagee 
may  himself  be  the  purchaser.  Maine,  Vermont,  Massachusetts, 
and  Connecticut,  like  our  own  state,  have  each  provided  other 
statutory  methods  of  foreclosure,  thus  in  effect  declaring  that  those 
other  methods  are  not  provided  and  intended  as  a  repeal  or  abro- 
gation of  the  common  law  in  this  respect.  See  Kinsley  v.  Ames, 
2  Met.  29;  White  v.  Brown,  2  Cush.  412;  Roart^j  v.  Mitchell,  7  Gray, 
243;  Capron  v.  Attlehorough  Bank,  11  Gray,  492;  Sinith  v.  Provin,  4 
Allen,  518;  Montague  v.  Dawes,  12  Allen,  397;  Wing  v.  Cooper,  37 
Vt.  183;  Walthall  v.  Rives,  34  Ala.  91;  Simson  v.  Eckstein,  22  Cal. 
590;  Mitchell  v.  Bogan,  11  Rich.  686;  Bradley  v.  Chester  Valley 
R.  R.  Co.,  36  Pa.  St.  141;  Hyman  v.  Devereaux,  63  N.  C.  624; 
Bloom  V.  Van  Rensselaer,  15  111.  503. 

Doubtless  the  power  ought  not  to  be  recognized  in  any  case, 
unless  it  is  conveyed  b}'  an  express  grant  and  in  clear  and  explicit 
language;  and  its  execution  should  be  jealously  watched  and  de- 
clared void  for  the  slightest  unfairness  or  excess,  or  for  anything 
that  prevents  competition.  But  the  legal  power  of  the  parties  to 
make  such  a  contract  must,  we  think,  be  upheld;  and  when,  in 
carrying  it  out,  the  alo\e  essential  conditions  are  fairly  fulfilled, 


VERY    ('.    RUSSELL  713 

the  sale  must  be  held  to  divest  the  mortgagee  of  all  his  rights  in 
the  premises.^ 

Was  the  execution  of  the  power  in  this  case  legal  and  effectual? 
We  think  not,  for  the  reason  that  the  mortgagee,  through  Shaw, 
was  the  purchaser  at  the  sale.  The  cases  are  numerous  where  it  is 
held  that  if  a  person  intrusted  to  sell  property  shall,  directly  or 
indirectly,  become  himself  the  purchaser,  the  sale  is,  ipso  facto, 
so  far  a  fraud  that  any  one  interested  in  it  as  cestui  que  trust  may 
avoid  it  at  his  election.  It  is  said  that  if  the  mortgage  contains  a 
power  of  sale,  the  mortgagee  becomes  a  quasi  trustee  for  the  mort- 
gagor, and  he  cannot  purchase,  or  if  he  does  he  becomes  a  con- 
structive trustee.  Per.  Tr.,  s.  199;  1  Wash.  R.  P.  500;  Snell  Eq. 
379.  Such  seems  to  be  the  weight  of  authority,  though  it  has  been 
held  in  some  cases  that  such  sale  can  only  be  impeached  by  show- 
ing actual  fraud.  Richards  v.  Holmes,  18  How.  143,  is  such  a  case; 
— and  see  Lyon  v.  Jones,  6  Humph.  533;  Edmonson  v.  Welsh,  27 
Ala.  578;  Benham  v.  Rowe,  2  Cal.  387;  Roberts  v.  Fleming,  53  111. 
196;  Griffin  v.  Marine  Co.,  52  111.  130. 

We  think  it  would  be  dangerous,  even  when  no  actual  fraud  is 
shown,  to  hold  the  sale  valid  in  such  cases,  and  that  the  safer 
course  is  to  discourage  every  appearance  or  suspicion  of  fraud  by 
adopting  strictly  the  rule  as  above  expressed,  that  a  purchase  of 
the  mortgaged  estate  by  the  mortgagee  must,  as  to  the  mortgagor, 
be  regarded  as  ipso  facto  fraudulent  and  void. 

The  defendant  claims  that  in  case  the  sale  should  be  held  invalid 
as  between  mortgagor  and  mortgagee,  his  situation  then  becomes 
that  of  a  mortgagee  in  possession,  and  therefore  that  this  action 
of  trespass  will  not  be  against  him  for  acts  done  on  the  premises 
while  so  in  possession.  This  position  cannot  be  sustained.  The 
quitclaim  deed  from  Cole  to  Shaw  passed  no  interest  in  the  mort- 
gage or  in  the  land,  because  there  was  no  transfer  of  the  debt  se- 
cured by  the  mortgage. 

There  is  another  ground,  however,  upon  which  the  defendant's 
title  must  be  upheld.  So  far  as  the  case  shows,  he  stands  in  the 
position  of  an  innocent  purchaser  for  value,  with  no  notice  or 
knowledge  of  the  fault  in  the  sale,  and  nothing  to  put  him  upon 
inquiry.  That  being  so,  it  is  a  well  and  long  established  rule,  that 
he  is  to  be  protectc;!  iii  his  title  according  to  the  legal  interpreta- 
tion of  the  instrument  of  conveyance  by  which  he  holds.  Harrison 
V.  Forth,  1  Eq.  Cas.  Abr.,  Notice,  A.  6,  p.  331,  A.  D.  1695.     Or, 

1  See,    First    Nat.    Batik    v.    Bell       Silver  &  Copper  Min.  Co.,  8  Mont.  32 

(1888). 


714     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

as  Judge  Story  expresses  it,  "If  a  person  who  has  notice  sells  to 
another  who  has  no  notice,  and  is  ahona  fide  purchaser  for  a  valuable 
consideration,  the  latter  may  protect  his  title,  although  it  was 
affected  with  the  equity  arising  from  notice  in  the  hands  of  the 
person  from  whom  he  derived  it."  2  Sto.  Eq.  Jur.,  s.  1502;  Snell 
Eq.  66;  Sm.  Eq.  17;  2  Sug.  Vend.  (8th  Am.  ed.)  753,  and  note  g; 
2  Dan.  Ch.  773;  Ad.  Eq.  37,  273;  Hill.  Vend.  408;  4  Kent  Com. 
179;  1  Par.  N.  &  Bills,  216;  2  ditto,  26;  Sto.  Pr.  Notes,  s.  191;  Smith 
V.  Hiscock,  14  Me.  449;  Hascall  v.  Whitmore,  19  Me.  102;  Piper  v. 
Hilliard,  52  N.  H.  209,  211;  Hood  v.  Fahnestock,  8  Watts,  489; 
Atwater  v.  Seymour,  Bray.  209;  Stevens  v.  Morse,  47  N.  H.  532,  537. 
The  application  of  this  doctrine  to  the  relief  of  the  defendant  is 
not  likely  to  work  any  serious  hardship  to  the  plaintiff.  The 
purchase-money  derived  from  the  auction  sale  is  an  extinguishment 
pro  tanto  of  the  plaintiff's  indebtedness  to  Cole.  If  the  property 
sold  for  its  fair  value,  and  the  sale  was  made  without  actual  fraud, 
the  plaintiff  has  not  been  wronged.  If  she  has  been  in  fact  de- 
frauded by  Cole,  she  has  her  remedy  against  him  in  an  action  for 
the  damages  occasioned  by  the  fraud.  And  even  if  she  should 
fail  in  that  remedy  by  reason  of  the  inability  of  Cole  to  respond  in 
damages,  it  would  seem  that  she  should  suffer  the  loss  rather  than 
the  defendant  who  is  equally  innocent,  because,  by  granting  to 
Cole  the  right  to  sell,  she  put  it  in  his  power  to  work  the  injury 
through  the  execution  of  that  power. 

Case  discharged. 


HADDINGTON  ISLAND  QUARRY  COMPANY,  LIMITED, 

V.  HUSON 

Privy  Council,  On  Appeal  from  the  Court  of  Appeal  of 
British  Columbia,  1911 

(L.  R.  [1911]  A.  C.  722) 

Lord  De  Villiers.^  This  is  an  appeal  against  a  judgment  of 
the  Court  of  Appeal  of  British  Columbia  reversing  a  judgment  of 
Morrison,  J.,  in  the  Supreme  Court,  which  dismissed  the  plain- 
tiffs' action  with  costs.  The  plaintiffs  were  the  mortgagors  and 
personal  representatives  of  mortgagors  of  a  certain  quarry  known 
as  Haddington  Island,  and  the  defendants  were  the  assignees  of 

^  Portion  of  opinion  omitted. 


HADDINGTON    ISLAND    QUARRY    COMPANY,    LIMITPID,    V.    HUSON-      715 

the  mortgage  and  purchasers  of  the  quarry,  the  sale  to  the  latter 
having  been  effected  Ijy  virtue  of  a  power  of  sale  conferred  on  the 
mortgagees  by  the  indenture  of  mortgage.  The  statement  of 
claim  contained  several  claims,  but  the  claims  to  which  the  argu- 
ments before  their  Lordships  were  mainly  directed  were  for  a 
cancellation  of  the  conveyance  to  the  purchasers,  and  for  a  declara- 
tion that  the  plaintiffs  were  entitled  to  redeem  the  mortgage. 

The  real  question,  therefore,  to  be  decided  in  this  appeal  is 
whether,  in  view  of  the  pleadings  and  of  the  evidence  given  at 
the  trial,  the  Court  of  Appeal  rightly  decided  that  there  was  such 
a  reckless  disregard  of  the  interests  of  the  mortgagors  as  would 
justify  the  setting  aside  of  the  sale. 

The  parties  against  whom  the  action  was  brought  were  not  only 
the  assignees  of  the  mortgage,  but  also  the  purchasers  of  the  prop- 
erty. The  sale  was  effected  by  virtue  of  a  power  which  is  in  the 
following  terms:  "If  the  mortgagors  make  default  as  to  any  of 
the  covenants  or  provisos  herein  contained,  the  principal  hereb\^ 
secured  shall,  at  the  option  of  the  mortgagee,  his  heirs  or  assigns, 
forthwith  become  due  and  payable,  and  in  default  of  payment 
the  powers  of  sale  hereby  given  may  be  exercised.  Provided  that 
the  said  mortgagee,  on  default  of  payment  for  one  month,  may, 
on  one  month's  notice,  enter  on  and  lease  or  sell  the  lands.  And 
provided  also  that,  in  case  default  be  made  in  payment  of  either 
principal  or  interest  for  two  months  after  any  payment  of  either 
falls  due,  the  said  powers  of  leasing  or  selling  or  any  of  them  may 
be  acted  upon  without  any  notice.  .  .  .  Provided  that,  in  default 
of  the  payment  of  the  interest  hereby  secured,  the  principal  hereby 
secured  shall  become  payable."  Ostensibly,  therefore,  the  mort- 
gagees acted  within  their  powers  in  selling  the  property,  and  the 
purchasers  are  entitled  to  the  full  benefit  of  their  purchase  unless 
it  be  alleged  and  proved  that  they  acted  in  collusion  with  the 
vendors,  or  that  the  price  was  so  low  as  in  itself  to  be  evidence  of 
fraud  or  collusion.  Unfortunately,  from  first  to  last  there  is  no 
allegation  in  the  statement  of  claim  charging  the  purchasers  with 
fraud  or  collusion  or  bad  faith  or  knowledge  of  the  existence  of 
facts  which  would  invalidate  the  sale.  The  allegations  that  the 
defendant  company,  that  is  to  say,  the  vendors,  did  not  use  any 
exertions  to  obtain  the  best  price  for  the  land,  and  that  they  sold  it 
to  the  purchasers  at  a  very  inadequate  price,  are  quite  consistent 
with  perfect  good  faith  on  the  part  of  the  purchasers,  and  yet  these 
are  the  only  allegations  from  which  it  could  possibly  have  been 
inferred  that  at  the  trial  attempts  would  be  made  to  charge  them 


716     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

with  collusion  or  want  of  good  faith.  At  the  trial  the  evidence  was 
mainly  directed  towards  establishing  those  grounds  of  claim  which 
have  since  been  practically  abandoned.  Incidentally,  Alden 
Huson,  one  of  the  plaintiffs,  was  asked  what  the  value  of  the  prop- 
ertv  was,  and  his  answer  was:  "Well,  it  is  worth  at  least  $20,000, 
at  the  very  least.  We  were  offered  $30,000  for  it  once."  As  this 
amount  is  far  in  excess  of  the  price  for  which  the  property  was 
sold,  namely,  $3,250,  it  is  contended  that  the  sale  should  not  be 
allowed  to  stand,  but,  in  the  absence  of  any  notice  to  the  defend- 
ants that  the  alleged  inadequacy  of  price  would  be  relied  upon  as 
proof  of  fraud  or  collusion  on  their  part,  they  should  not  be  preju- 
diced by  their  failure  to  produce  counter-evidence  as  to  value. 
The  evidence  as  to  value  given  on  behalf  of  the  plaintiffs  was  of 
the  most  flimsy  nature.  Huson  said  that  they  had  been  offered 
S30,000  for  the  quarry,  but  did  not  produce  the  person  who  had 
made  the  offer.  Nor  did  the  plaintiffs  produce  any  expert,  or 
indeed  any  other,  evidence  in  support  of  Huson 's  casual  statement 
as  to  value.  If  the  property  was  so  valuable  early  in  1908,  there 
is  no  satisfactory  explanation  why  it  was  not  sold  and  the  pro- 
ceeds of  the  sale  applied  towards  redemption  of  the  mortgage. 
It  is  clear  from  the  correspondence  that  as  far  back  as  January, 
1908,  Huson  knew  that  there  was  a  prospect  of  the  property  being 
immediately  sold  for  the  amount  of  the  original  mortgage  debt,  but, 
although  he  protested  against  such  a  sale,  he  made  no  attempt  to 
find  the  means  of  paying  the  Government  the  sum  of  $1,150,  which 
was  all  that  was  then  still  owing  for  principal  and  interest.  Under 
the  indenture  of  mortgage  the  mortgagors  were  at  liberty  to  pay 
the  debt  after  three  months'  notice  in  writing  to  the  mortgagee  or 
his  assigns,  or  upon  the  payment  of  three  months'  interest  in  lieu 
of  notice.  No  such  notice  appears  to  have  been  given,  nor  in- 
terest tendei'ed  either  to  the  Government  or  to  the  defendant 
company  after  it  had,  in  March,  1908,  obtained  from  the  Govern- 
ment an  assignment  of  the  mortgage.  The  defendant  company 
accordingly  sold  the  property  for  $3,250,  and  it  now  holds  the 
balance,  after  payment  of  capital  and  interest,  at  the  disposal  of 
those  entitled  thereto.  The  trial  judge  was  perfectly  satisfied  as 
to  the  validity  of  the  transaction.  In  the  notice  of  appeal  to  the 
Court  of  Appeal,  although  other  grounds  of  alleged  invalidity  are 
fully  stated,  not  a  word  is  said  as  to  fraud  or  collusion,  but  the 
Court  held,  in  effect,  that  the  sale  was  fraudulent.  Among  the 
cases  cited  by  Galliher,  J.,  was  that  of  Warner  v.  Jacob,  (1882), 
51  L.  J.  (Ch.)  642,  where  Kay,  J.,  summing  up  the  authorities, 


CLARK    /'.    SIMMONS  717 

is  re})orted  to  have  said :  "  The  result  seems  to  be  that  a  mortgagee 
is,  strictly  speaking,  not  a  trustee  of  the  power  of  sale.  It  is  a  power 
given  to  him  for  his  own  benefit,  to  enable  him  the  better  to  realize 
his  mortgage  del)t.  If  he  exercises  it  bona  fide  for  that  purpose, 
without  corruption,  or  collusion  with  the  purchaser,  the  Court 
will  not  interfere,  even  though  the  sale  be  very  disadvantageous, 
unless  indeed  the  price  is  so  low  as  in  itself  to  be  evidence  of 
fraud."  In  the  present  case  the  statement  of  claim  alleged,  in 
effect,  that  the  sale  was  very  disadvantageous,  but  it  gave  no  hint 
to  the  defendants  that  they  would  be  called  upon  at  the  trial  to 
meet  a  charge  of  either  corruption  or  collusion,  or  to  meet  the  case 
that  the  price  was  so  low  as  in  itself  to  be  evidence  of  fraud.  Under 
these  circumstances,  their  Lordships  are  unable  to  attach  the 
same  importance  as  was  attached  by  the  Court  of  Appeal  to  the 
circumstance  that  the  defendants  produced  no  evidence  as  to  the 
value  of  the  property,  nor  are  they  prepared  to  dissent  from  the 
finding  on  the  facts  by  the  learned  judge  at  the  trial.  They  will 
therefore  humbly  advise  His  Majesty  that  the  judgment  of  the 
Court  of  Appeal  should  be  reversed  and  the  judgment  of  Mor- 
rison, J.,  restored.  The  respondents  will  bear  the  costs  of  this 
appeal  and  the  costs  incurred  in  the  Court  of  Appeal  and  the 
Supreme  Court.  ^ 


CLARK  V.  SIMMONS 

Supreme  Judicial  Court  of  Massachusetts,  1890 

(150  Mass.  357) 

Bill  in  Equity,  filed  in  the  Superior  Court,  to  redeem  land  in 
Hanson  from  several  mortgages.  Hearing  before  Hammond,  J., 
who  found  the  following  facts : 

Edwin  J.  Brewster,  who  then  owned  the  land  in  question,  suc- 
cessively gave  four  mortgages  thereof  to  Martin  Howland,  the 
last  of  which  was  dated  June  27,  1884,  the  first  three,  which  were 
duly  recorded  l>efore  December  1,  1884,  being  for  two  hundred  and 
fifty  dollars  each,  and  the  fourth,  which  was  not  recorded  until 
December  8,  1884,  being  for  one  hundred  and  fifty  dollars.     On 

'  A  mortgagee  foreclosing  by  ad-  in   a  fair  and   just   manner  and   in 

vertisement  is  regarded  in  equity  as  good  faith.     Soule  v.  Ludlow,  3  Hun. 

in   the   nature  of   a   trustee   and   is  (N.   Y.),  503   (1875). 
bound    to    conduct   the   proceedings 


718     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

August  30,  1884,  Brewster  executed  a  fifth  mortgage,  which  was 
duly  recorded  on  December  1,  1884,  for  two  hundred  and  fifty 
dollars  to  the  plaintiff,  who  then  knew  that  the  land  was  mort- 
gaged for  the  aggregate  amount  of  the  four  prior  mortgages,  but 
covered  as  he  supposed  by  one  mortgage;  and  he  did  not  become 
aware  of  the  existence  of  the  second  and  third  mortgages  until  he 
recorded  the  fifth  mortgage  on  December  1,  1884,  and  he  did  not 
know  of  the  existence  of  the  fourth  mortgage  until  the  land  was 
subsequently  sold  under  the  first  mortgage.  Afterwards  the  de- 
fendant, who  had  been  duly  appointed  assignee  in  insolvency  of 
Brewster,  took  an  assignment  in  his  individual  capacity  of  the  first 
four  mortgages  from  Rowland,  at  a  time  when  there  was  a  breach 
of  condition  of  the  first  mortgage.  At  that  time  the  plaintiff 
asked  the  defendant  to  notify  him  when  he  should  take  action 
looking  to  a  sale.  The  defendant  duly  advertised  the  land  for 
sale  on  September  1,  1888,  on  the  premises,  under  the  first  mort- 
gage, in  a  newspaper  which  satisfied  the  terms  of  the  mortgage.. 
On  that  day  the  defendant  was  ill,  and,  no  bidders  being  present, 
the  sale  w^as  adjourned  by  order  of  the  defendant,  and  the  auc- 
tioneer orally  proclaimed  an  adjournment  to  the  same  place  on  a 
future  day  named.  The  sale  was  afterwards  adjourned  several 
times,  in  the  same  manner  and  for  the  same  reason,  and  finally 
until  November  24,  1888,  at  nine  o'clock  in  the  forenoon. 

On  November  23,  1888,  the  defendant  wrote  a  letter  and  mailed 
it  to  the  plaintiff,  stating  that  the  premises  would  be  sold  on  the 
next  day,  but  without  stating  the  hour  or  the  place.  This  letter 
by  the  usual  course  of  mail  reached  the  plaintiff's  post-office  at 
seven  o'clock  in  the  evening  on  the  same  day,  but  the  plaintiff 
did  not  get  it  until  nine  o'clock  on  the  same  evening.  On  the 
morning  of  November  24,  the  plaintiff  made  inquiries  of  the 
people  near  the  premises,  but  could  gain  no  information  as  to  the 
time  or  place  of  the  sale.  The  plaintiff  did  not  take  or  see  the  news- 
paper in  which  the  original  advertisement  appeared,  and  no  copy 
of  the  advertisement  was  at  any  time  sent  to  him,  and  he  was 
ignorant  of  the  proposed  sale  until  he  received  the  defendant's 
letter.  There  was  no  notice  of  the  time  and  place  of  the  adjourned 
sales,  except  the  successive  oral  proclamations  of  the  auctioneer, 
and  no  notice  of  any  kind  was  ever  posted  upon  the  premises,  and 
no  one  was  present  at  any  time  except  the  auctioneer  and  the 
agent  of  the  defendant.  On  that  morning  the  auctioneer  and  the 
defendant's  agent  reached  the  mortgaged  premises  about  twenty 
minutes  before  the  time  fixed  for  the  sale,  and  at  nine  o'clock, 


CLARK    V.    SIMMONS  719 

there  being  no  other  persons  present,  the  land  was  purchased  by 
the  defendant,  through  his  agent,  for  twelve  hundred  dollars, 
which  amount  was  at  least  two  hundred  dollars  less  than  its  fair 
market  value. 

The  judge  made  a  decree  that  the  first  four  mortgages  were  valid 
as  against  the  plaintiff;  that  the  sale  under  the  power  in  the  first 
mortgage  was  invalid;  and  that  the  plaintiff  was  entitled  to  re- 
deem upon  paying  what  was  due  upon  such  mortgages;  and  re- 
ported the  case  for  the  determination  of  this  court. 

The  case  was  argued  at  the  bar  in  October,  1889,  and  after- 
wards was  submitted  on  the  briefs  to  all  the  judges,  except  Mor- 
ton, C.  J. 

Knowlton,  J.  On  the  facts  found,  the  plaintiff  does  not  at- 
tack that  part  of  the  decree  which  adjudges  that  the  fourth  mort- 
gage of  Brewster  to  Rowland,  assigned  to  the  defendant,  is  good 
against  the  plaintiff,  and  the  only  question  before  us  arises  on  the 
defendant's  contention  that  the  sale  made  by  him  under  the 
power  contained  in  the  first  mortgage  is  valid. 

It  has  repeatedly  been  held  in  this  Commonwealth,  and  else- 
where, that  a  mortgagee  who  attempts  to  execute  a  power  of  sale 
contained  in  the  mortgage  is  bound  to  exercise  good  faith,  and  to 
use  reasonable  diligence  to  protect  the  rights  and  interests  of  the 
mortgagor  under  the  contract.  Montague  v.  Dawes,  14  Allen,  369; 
Drinan  v.  Nichols,  115  Mass.  353;  Thompson  v.  Heywood,  129  Mass. 
401;  Briggs  v.  Briggs,  135  Mass.  306.  If  he  fails  to  do  his  duty  in 
this  respect,  a  mere  literal  compliance  with  the  terms  of  the  power 
will  not  render  the  sale  valid  against  the  mortgagor  in  favor  of  one 
charged  with  knowledge  of  the  delinquency,  although  it  may  be 
sufficient  if  the  purchaser  is  a  stranger  who  buys  in  good  faith. 
In  determining  whether,  in  a  particular  case,  a  mortgagee  has 
acted  in  good  faith  and  with  a  due  regard  for  the  interests  of  the 
mortgagor,  the  nature  of  his  authority  must  be  considered.  He  has 
a  right,  after  giving  the  prescribed  notices,  to  have  the  mortgaged 
property  sold  by  auction  for  the  payment  of  his  debt.  It  is  his 
duty,  for  the  benefit  of  the  mortgagor  whom  he  represents,  so  to 
act  in  the  execution  of  the  power  as  to  obtain  for  the  property  as 
large  a  price  as  possible.  Ordinarily  the  parties  stipulate  in  the 
mortgage  what  kind  of  notices  of  the  sale  shall  be  given,  and  ordi- 
narily a  mortgagee  is  not  required  to  give  a  notice  of  a  different 
kind;  so  far  as  the  mortgage  leaves  him  a  power  of  selection  of 
methods  of  giving  notice  and  of  making  the  sale,  he  is  to  act 


720  ENFORCEiMENT   OF   THE    MORTGAGE   BY   MORTGAGEE 

reasonably  and  exercise  a  sound  discretion.  The  contract  implies 
that,  upon  the  notice  prescribed,  an  auction  sale  can  be  had;  that 
is,  that  bidders  will  be  attracted  so  that  the  pi'operty  can  be  sold. 
A  sale  by  auction  necessarily  involves  the  presence  of  one  or  more 
persons  who  are  willing  to  buy.  If  the  notices  given  fail  to  bring 
such,  a  power  to  sell  by  auction  cannot  be  executed.  If  the  mort- 
gagee is  not  authorized  to  purchase,  and  no  bidders  are  present, 
it  is  quite  obvious  that  no  sale  can  be  made.  And  if  the  only  person 
present  who  will  buy  at  all  will  offer  only  a  small  part  of  the  well- 
known  value  of  the  property,  the  conditions  which,  under  the 
contract,  are  impliedly  essential  to  the  execution  of  the  power  are 
wanting,  and  it  is  the  duty  of  the  mortgagee  either  to  abandon  his 
attempt  to  sell  or  to  adjourn  the  sale  until  he  can  obtain  the 
presence  of  bidders.  Good  faith  and  a  reasonable  regard  for  the 
interests  of  the  mortgagor  will  not  permit  him  to  make  a  sale,  when 
no  one  will  offer  a  price  which  an  owner  could  reasonably  think 
of  accepting  if  he  were  obliged  to  sell  the  property  at  a  day's  notice 
for  what  it  would  bring.  In  such  a  case,  where  the  notices  given 
have  .failed  to  accomplish  the  purpose  which  they  contemplated 
that  they  would  accomplish,  it  is  the  duty  of  the  mortgagee,  if  he 
would  make  a  sale,  properly  to  represent,  not  only  his  own  right 
to  have  the  estate  sold  for  his  benefit,  but  also  the  right  of  the  mort- 
gagor to  have  an  auction  sale,  such  as  both  parties  must  be  pre- 
sumed to  have  contemplated  by  their  contract,  and  to  get  for  the 
property  as  much  as  it  can  reasonably  be  made  to  bring.  Under 
such  circumstances  he  should  do  what  a  reasonable  man  would  be 
expected  to  do  to  accomplish  that  result.  A  failure  to  do  that 
would  be  evidence  of  a  want  of  good  faith,  and  such  a  neglect, 
without  an  active  purpose  to  defraud,  would  invalidate  the  sale, 
unless  it  was  made  to  a  stranger  who  bought  in  good  faith. 

In  the  case  at  bar,  there  were  no  bidders  present  at  the  time  and 
place  appointed  for  the  sale,  and  the  sale  was  adjourned  then  and 
several  times  afterwards,  no  one  at  any  time  being  present  except 
the  auctioneer  and  an  agent  of  the  defendaht,  and  no  notice  of  any 
adjournment  being  given  except  by  proclamation  at  the  time  by 
the  auctioneer.  Finally  the  estate  was  sold,  nearly  three  months 
after  the  time  named  in  the  original  notice,  the  plaintiff  never 
having  heard  of  the  proceedings  until  nine  o'clock  in  the  evening 
of  the  day  before  the  sale,  and  having  merely  received  a  letter 
which  gave  the  day  without  stating  the  hour  or  place  of  the  sale, 
and  having  been  unable  upon  inquiry  in  the  neighborhood  to  learn 
anything  about  it.     The  mortgagee  bought  the  property  for  at 


TAYLOR    V.    WEINGARTNER  721 

least  two  hundred  dollars  less  than  its"  fair  market  value.  The 
plaintiff  had  requested  the  defendant  to  notify  him  when  he  should 
take  action  looking  to  a  sale. 

Under  these  circumstances,  we  think  the  defendant  failed  to  do 
that  which  the  exercise^  of  good  faith  and  the  use  of  proper  diligence 
required  of  him  for  the  protection  of  the  plaintiff's  interests.  At 
the  time  of  each  adjournment,  there  was  no  probability  that  any- 
one would  come  on  the  day  to  which  the  sale  was  adjourned.  No 
one  but  the  auctioneer  and  the  defendant's  agent,  so  far  as  appears, 
knew  of  any  adjournment,  and  no  notice  was  given  to  anybody  of 
the  time  fixed  for  the  sale  which  was  finally  made.  We  cannot 
infer  that  notice  to  the  plaintiff  and  a  reasonable  effort  to  notify 
others  would  have  failed  to  procure  the  attendance  of  bidders  at 
the  times  fixed  by  the  adjournments. 

If  such  effort  had  failed  to  induce  the  attendance  of  any  one, 
upon  what  terms  the  defendant  could  have  purchased,  without 
being  phargeable  with  bad  faith,  it  is  unnecessary  to  decide.  In- 
adequacy of  price  will  not  invalidate  a  sale,  unless  it  is  so  gross  as 
to  indicate  bad  faith,  or  a  want  of  reasonable  judgment  and  dis- 
•cretion  in  the  mortgagee.  Horsey  v.  Hough,  38  Md.  130;  Learned 
v.  Geer,  139  Mass.  31. 

Decree   affirmed. 

TAYLOR  V.  WEINGARTNER 

Supreme  Judicial  Court  of  Massachusetts,  1916 

(223  Mass.  243) 

Crosby,  J.^  The  plaintiff  on  December  6,  1911,  purchased  from 
the  defendant  certain  real  estate  situated  in  Boston.  The  premises 
were  sold  subject  to  a  first  mortgage  thereon  of  $10,000.  The 
defendant,  in  addition  to  the  conveyance  of  the  real  estate,  paid 
the  plaintiff  .$1,200  in  cash  and  received  in  return  a  deed  of  certain 
lots  of  land  in  Brighton,  in  the  city  of  Boston,  and  a  note  for  -13,700 
secured  by  a  second  mortgage  on  the  real  estate  so  conveyed  to  the 
plaintiff.  This  mortgage  contained  a  power  of  sale  in  the  usual 
form,  one  of  its  provisions  being  that  the  mortgagor  "shall  pa\'  all 
taxes  and  assessments  to  whomsoever  laid  or  assessed,  whether  on 
the  granted  premises,  or  on  any  interest  therein." 

About  a  year  after  the  transactions  above  referred  to,  the  plain- 

1  Portion  of  opinion  omitted. 


722     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

tiff  sold  the  real  estate  to  one  Ambler  subject  to  the  two  mortgages, 
there  being  at  that  time  $3,400  unpaid  upon  the  second  mortgage. 
Shortly  afterwards  Ambler  sold  the  premises  to  one  Fulton  subject 
to  the  first  and  second  mortgages,  and  on  March  29,  1913,  Fulton 
sold  the  premises  to  one  Nickerson  subject  to  the  first  and  second 
mortgages.  At  that  time  $3,300  remained  unpaid  on  the  second 
mortgage;  no  instalments  of  principal  or  interest  on  the  note  se- 
cured by  the  second  mortgage  were  then  due,  but  the  taxes  assessed 
on  the  property  as  of  April  1,  1912,  with  interest  thereon,  amount- 
ing all  together  to  about  $300,  were  overdue  and  unpaid. 

On  April  7,  1913,  the  defendant  made  an  entry  upon  the  premises 
to  foreclose  the  second  mortgage  for  breach  of  condition  for  failure 
to  pay  the  taxes  assessed  as  of  April  1,  1912,  and  thereafter  he 
collected  rents  from  the  property  amounting  to  $141  up  to  Alay  29, 
1913,  when  he  caused  the  premises  to  be  sold  under  the  power 
contained  in  the  second  mortgage.  Notice  of  the  foreclosure  sale 
was  published  in  conformity  with  the  terms  of  the  mortgage,  the 
sale  being  advertised  to  take  place  on  May  15,  1913.  On  that  date 
no  bidders  appeared  and  at  the  request  of  Nickerson,  the  owner 
of  the  equity  of  redemption,  the  sale  was  adjourned  by  the  auction- 
eer until  May  29,  1913,  at  ten  o'clock  in  the  forenoon.  On  May  29, 
at  the  time  and  place  fixed  for  the  sale,  there  were  present  the  de- 
fendant and  his  attorney,  the  auctioneer,  and  Nickerson,  the 
owner  of  the  equity  of  redemption.  The  defendant  bid  $800  for 
the  property  and,  as  there  were  no  other  bids,  he  was  declared  the 
purchaser  and  afterwards  executed  and  delivered  a  deed  under 
the  power  in  the  mortgage  in  which  he  was  named  as  grantee. 
The  defendant  has  since  sold  the  premises  subject  to  the  first  mort- 
gage and  taken  a  second  mortgage  for  a  part  of  the  purchase  price. 

On  June  18,  1913,  the  defendant  brought  an  action  against  the 
plaintiff  to  recover  the  balance  alleged  to  be  due  him  on  the  $3,700 
note,  which  action  is  now  pending.  This  bill  is  brought  to  enjoin 
the  defendant  from  prosecuting  the  action  upon  the  note.  The 
plaintiff  alleges  that  the  foreclosure  sale  was  not  conducted  fairly 
and  in  good  faith  by  the  defendant  on  account  of  which  the  property 
was  sold  for  a  grossly  inadequate  price,  whereas  if  the  defendant 
had  conducted  the  sale  with  due  regard  for  the  rights  of  the  plain- 
tiff nothing  would  be  due  upon  the  note. 

While  the  first  prayer  of  the  bill  is  that  the  foreclosure  sale  be 
decreed  to  be  void,  we  do  not  understand  that  the  plaintiff  at  the 
hearing  before  the  judge  of  the  Superior  Court  asked  for  such  a 
decree,  but  contended  that  the  defendant  should  be  held  liable  to 


TAYLOR   V.    WEINGARTNER  723 

account  for  the  fair  value  of  the  property  and  that  the  plaintiff 
was  entitled  to  a  decree  for  the  difference  between  such  value  and 
the  amount  for  which  the  property  was  bid  off  by  the  defendant, 
and  that  such  difference  would  equal  or  exceed  the  balance  due 
on  the  note.  We  assume  that  the  contention  of  the  plaintiff  before 
-this  court  is  the  same  as  that  made  by  him  in  the  Superior  Court. 

A  final  decree  having  been  entered  in  the  Superior  Court  dis- 
missing the  bill,  from  which  the  plaintiff  has  appealed,  it  becomes 
necessary  to  consider  in  detail  the  findings  of  fact  made  by  the 
judge  in  his  memorandum  so  far  as  they  are  said  by  the  plantiff 
to  have  been  plainly  wrong. 

The  fourth  assignment  of  errors  raises  the  question  whether 
there  was  a  valid  sale  under  the  power  in  the  mortgage.  When 
the  proceedings  to  foreclose  the  mortgage  were  instituted  on 
April  23,  1913,  it  is  plain  that  there  existed  a  breach  of  the  condi- 
tion to  pay  the  taxes.  The  undisputed  evidence  shows  that  the 
taxes  assessed  as  of  April  1,  1912,  were  past  due  and  unpaid  and 
that  interest  thereon  had  been  accumulating  since  November  1, 
1912,  and  the  security  of  the  mortgage  w^as  diminishing.  If  it  be 
conceded  that  the  defendant  was  bound  to  apply  the  rents  re- 
ceived in  payment  of  the  taxes,  it  appears  that  the  total  amount 
of  rents  collected  was  much  less  than  the  amount  of  the  tax.  The 
contention  of  the  plaintiff  that  the  defendant  was  obliged  to  pay 
the  tax  before  he  had  a  right  to  foreclose  the  mortgage  cannot  be 
sustained.  Under  the  circumstances  disclosed  by  the  evidence  the 
defendant  was  entitled  to  proceed  to  foreclose  his  mortgage  for 
breach  because  of  the  failure  of  the  plaintiff  to  pay  the  tax  assessed 
as  of  April  1,  1912.  Stevens  v.  Cohen,  170  Mass.  551,  554.  The 
defendant  in  executing  the  power  was  bound  to  exercise  the  ut- 
most good  faith  for  the  protection  of  the  rights  of  the  owner  of 
the  equity  of  redemption  as  well  as  those  of  the  plaintiff. 
Boutelle  v.  Carpenter,  182  Mass.  417.  The  mortgagee  in  the  exer- 
cise of  the  power  was  bound  not  only  to  comply  with  its  literal 
terms  but  was  required  to  use  reasonable  diligence  to  protect  the 
rights  and  interests  of  the  owner  of  the  equity  of  redemption  and 
the  plaintiff.  Bon  v.  Graves,  216  Mass.  440,  446;  Briggs  v.  Briggs, 
135  Mass.  306,  309;  Dexter  v.  Shepard,  117  Mass.  480.  There 
was  evidence  to  show  that  the  notice  of  sale  was  published  not  only 
in  the  Boston  Advertiser  but  also  in  the  Banker  and  Tradesman, 
that  notice  was  mailed  to  the  plaintiff,  and  that  the  owner  of  the 
equity  of  redemption  also  had  notice,  that  on  May  15,  the  day 
fixed  for  the  sale,  it  was  adjourned  for  two  weeks  by  direction  of 


724     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

the  defendant  at  the  request  of  Nickerson,  the  owner  of  the  equity, 
for  the  purpose  of  giving  him  an  opportunity  to  pay  the  taxes, 
that,  the  taxes  not  having  been  paid,  the  sale  was  made  on  May 
29.  While  the  defendant  was  the  only  bidder,  that  fact  is  not 
sufficient  to  set  aside  the  sale,  nor  does  the  fact  that  the  estate 
brought  less  than  its  value  as  found  by  the  court  render  it  invalid. 
Learned  v.  Geer,  139  Mass.  31;  Stevenson  v.  Hano,  148  Mass.  616; 
Fennyery  v.  Ransom,  170  Mass.  303;  New  England  Mutual  Life 
Ins.  Co.  V.  Wing,  191  Mass.  192;  Turansky  v.  Weinberg,  211  Mass 
324;  Vahey  v.  Bigelow,  208  Mass.  89.  The  evidence  shows  that 
the  defendant  complied  in  all  respects  with  the  power.  There 
was  also  evidence  to  show  that  he  endeavored  to  induce  others  to 
attend  the  sale  and  bid  upon  the  property.  On  the  other  hand, 
while  there  was  evidence  to  show  that  the  plaintiff  had  notice  of 
the  sale,  he  did  not  attend  nor  does  it  appear  that  he  did  anything 
to  protect  his  rights  by  attempting  to  procure  the  attendance  of 
others  or  otherwise.  King  v.  Bronson,  122  Mass.  122.  So  long  as 
the  plaintiff  relied  upon  the  allegations  that  the  sale  was  not 
conducted  fairly  and  in  good  faith,  the  burden  rested  upon  him  to 
show  it.  Wadsworth  v.  Glynn,  131  Mass.  220;  Vahey  v.  Bigelow,  208 
Mass.  89,  93. 

We  are  of  opinion  that  the  notice  of  sale  was  valid  and  that  the 
finding  of  the  judge  of  the  Superior  Court  that  the  sale  was  con- 
ducted in  good  faith  and  fully  conformed  to  the  terms  of  the  power 
cannot  be  held  to  have  been  plainly  wrong.  It  cannot  be  ruled  as 
matter  of  law  that  notice  of  the  adjournment  should  have  been 
published  in  a  newspaper  or  that  the  proclamation  made  by  the 
auctioneer  on  May  15  was  not  sufficient.  As  was  said  in  Dexter  v. 
Shepard,  117  Mass.  480,  at  page  485,  "A  sale  regularly  adjourned 
is,  when  made,  in  effect  the  sale  of  which  previous  notice  had  been 
given."  The  sale  was  made  only  fourteen  days  after  the  time 
named  in  the  original  notice  and  there  was  evidence  that  the  plain- 
tiff had  or  might  have  had  notice  of  the  adjournment  by  the  exer- 
cise of  reasonable  diligence  for  the  protection  of  his  interests - 
The  facts  in  Clark  v.  Simmons,  150  Mass.  357,  plainly  distinguish 
that  case  from  the  case  at  bar.  Upon  this  question  of  adjourn- 
ment the  memorandum  of  the  judge  contains  the  following:  "I 
am  unable  to  find  that  a  further  adjournment,  even  though  ac- 
companied by  a  new  advertisement,  would  have  resulted  in  the 
attendance  at  the  sale  of  persons  who  would  have  paid  a  greater 
sum.  Such  a  favorable  result  is  pure  speculation."  See  Austin  v. 
Hatch,  159  Mass.  198.  Decree  affirmed  with  costs. 


MASLIN  V.   MARSHALL  725 

MASLIN  V.   MARSHALL 
Court  of  Appeals  of  Maryland,  1902 
(94  Md.  480). 

ScHMUCKER,  J.,  delivered  the  opinion  of  tlu^  Court. 

The  appeal  in  this  case  is  from  an  order  of  the  Circuit  Court 
No.  2  of  Baltimore  City,  overruling  certain  exceptions  to  the  ratifi- 
cation of  a  sale  of  mortgaged  property.  The  sale  was  made  by 
the  appellee,  as  assignee  of  the  mortgage,  in  the  exercise  of  a  power 
of  sale  therein  contained. 

The  mortgage  was  made  on  October  28th,  1897,  from  George  A. 
Dubreuil  and  others  to  Mary  E.  Garrett,  William  F.  Frick  and 
Charles  F.  Mayer,  trustees  under  the  will  of  the  late  John  W.  Gar- 
rett, to  secure  certain  promissory  notes  of  the  mortgagors. 

The  mortgage  and  the  notes  secured  by  it  were  assigned  by  the 
trustees  to  the  Safe  Deposit  and  Trust  Company  of  Baltimore, 
a  body  corporate,  and  were  by  it  assigned  to  the  appellee. 

The  mortgage  contained  a  power  of  sale  in  the  usual  form  to 
"the  said  William  F.  Frick,  Charles  F.  Mayer  and  Mary  E.  Gar- 
rett trustees  as  aforesaid  or  the  survivors  or  survivor  of  them  or 
their  successors  or  successor  in  said  trust,"  authorizing  them  to 
sell  the  mortgaged  property  in  case  of  default  in  payment  of  the 
mortgage  debt.  A  default  having  occurred  the  appellee  made  sale 
of  the  mortgaged  premises,  professing  to  act  in  so  doing  under  the 
power  of  sale  contained  in  the  mortgage,  and  reported  the  sale  to 
Circuit  Court  No.  2  for  ratification,  when  the  appellant,  who  was 
the  purchaser  at  the  sale,  excepted  to  its  ratification.  The  Court 
by  its  order  of  October  3d,  1901,  overruled  the  exceptions  and 
finally  ratified  the  sale  whereupon  the  present  appeal  was  taken 
from  that  order. 

Two  grounds  of  exception  were  urged  in  argument  by  the  ap- 
pellant. One  was  that  the  power  of  sale  contained  in  the  mortgage 
was  personal  to  the  mortgagees,  who  were  the  trustees  already 
named,  and  their  successors  in  trust  under  Mr.  Garrett's  will, 
and  that  it  did  not  pass  to,  and  could  not  be  exercised  by,  an  as- 
signee of  the  mortgage.  The  other  ground  was  that  even  if  the 
power  were  a  transmissible  one  the  assignment- of  the  mortgage  to 
the  Safe  Deposit  and  Trust  Company  which  was  a  corporation 
destroyed  the  power  because  it  could  not  be  exercised  by  a  cor- 
poration.   Neither  of  these  grounds  of  exception  would  have  con- 


726     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

stituted  a  sufficient  reason  for  refusing  to  ratify  the  sale  and  the 
learned  Judge  below  properly  overruled  the  exceptions  and  passed 
the  order  of  final  ratification. 

The  appellant  relied  especially  upon  the  absence  of  the  word 
"assigns"  after  the  names  of  the  mortgagees  in  the  power  of  sale 
as  evidence  that  the  power  was  not  intended  to  pass  with  an  as- 
signment of  the  mortgage,  but  we  do  not  agree  with  him.  The 
authority  to  include  a  power  of  sale  in  a  mortgage  is  derived  from 
sec.  6  of  Art.  66  of  the  Code  which,  provides  for  the  insertion  in  all 
mortgages  of  a  clause  giving  such  power  to  "the  mortgagee  or 
any  other  person  to  be  named  therein."  No  mention  of,  or  al- 
lusion to,  assigns  or  assignees  is  made  in  that  connection,  and  yet 
further  on  in  the  same  sentence  it  is  provided  that  "where  the  in- 
terests in  any  mortgage  are  held  under  any  one  or  more  assignments'' 
the  power  of  sale  shall  be  held  divisible  and  the  person  ''holding  any 
such  interest''  who  first  institutes  proceedings  to  execute  the  power 
shall  have  the  exclusive  right  to  sell  the  mortgaged  premises,  thils 
showing  conclusively  that  the  Code  not  only  contemplates  the  ex- 
ercise of  the  power  of  sale  by  the  assignees  of  a  mortgage  but  in 
certain  cases  regulates  the  method  of  its  exercise  by  them. 

Furthermore  this  Court  has  repeatedly  held  that  a  power  of  sale 
conferred  by  a  mortgage  upon  the  mortgagee,  being  intended  to 
afford  him  a  means  of  promptly  collecting  his  debt,  is  a  power 
coupled  with  an  interest  and  is  therefore  appurtenant  to  the  es- 
tate and  passes  with  it  as  part  of  the  mortgage  security  to  an  as- 
signee of  the  mortgage  or  even  of  the  mortgage  debt.  Berry  v. 
Skinner,  30  Md.  567;  Dill  v.  Salter  field,  34  Md.  53;  Mackubin  v. 
Boarman,  54  Md.  387;  Barrick  v.  Horner,  78  Md.  255. 

When  a  power  is  appurtenant  to  an  estate  it  passes  to  the  as- 
signee of  the  estate  not  because  he  was  designated  in  the  grant 
of  the  power,  nor  because  of  special  confidence  reposed  in  him  by 
such  grantor  as  a  suitable  person  to  execute  the  power.  It  passes 
to  him  as  an  incident  of  the  estate  conveyed  to  him  just  as  a  right 
of  way  or  other  easement  or  appurtenance  used  or  enjoyed  there- 
with would  pass  to  him.  No  delectus  persona;  by  the  grantor  is 
involved  in  the  transmission  of  such  a  power,  as  is  the  case  with  a 
power  in  gross  or  a  collateral  one  which  can  be  exercised  only  by 
the  persons  designated  in  the  instrument  creating  the  power. 

The  absence  of  the  word  assigns  from  the  clause  of  the  mortgage 
granting  the  power  of  sale  in  the  present  case  is  unimportant  for 
another  reason.  No  words  of  inheritance  are  now  necessary  to 
aass  an  estate  in  fee  to  the  grantee  in  a  deed,  nor  is  the  word  as- 


MASLIN   V.    MARSHALL  727 

fiigns  or  any  similar  expression  requisite  to  pass  to  a  mortgagee  an 
assignable  interest  in  the  mortgaged  property,  and  by  parity  of 
reasoning  the  presence  of  any  such  words  in  a  mortgage  power  of 
sale  should  not  be  required  to  make  it  transmissible  as  an  incident 
of  the  mortgagee's  estate. 

In  Dill  V.  Satterfield,  supra,  the  ratification  of  a  sale  of  mortgaged 
property,  which  has  been  made  by  an  assignee  of  the  mortgage 
under  a  power  of  sale  given  to  the  mortgagee,  was  excepted  to 
upon  the  express  ground  that  the  power  of  sale  had  been  conferred 
upon  the  mortgagee  alone  and  could  not  be  exercised  by  the  as- 
signee. This  Court  there  held  it  to  be  clear,  upon  the  authority  of 
Berry  v.  Skinner,  supra,  that  the  power  had  been  properl}'  exercised 
although  the  appellant  was  held  not  to  be  entitled  to  raise  that  ques- 
tion in  this  Court  because  he  had  not  appealed  from  the  order 
overruling  his  exceptions  and  ratifying  the  sale  but  from  a  subse- 
quent order  awarding  a  writ  of  habere  facias  to  the  purchaser  at 
the  sale. 

Xor  do  we  think  that  the  power  of  sale  in  this  case  was  destroyed 
because  the  mortgagee's  estate  was  for  a  time  vested  in  the  Safe 
Deposit  and  Trust  Company.  The  charter  of  that  corporation 
is  not  in  the  record  and  we  therefore  do  not  know  what  special 
powers  it  may  possess.  But  assuming  that  it,  like  the  corporations 
which  were  before  this  Court  in  the  cases  of  The  Frosthurg  Mutual 
Bldg.  Assn.  v.  Lowdermilk,  50  ]Md.  179,  and  The  Queen  City  Bldg. 
Assn.  V.  Price,  53  Md.  399,  was  incapable  of  executing  the  power, 
it  does  not  follow  that  when  the  mortgage  came  to  be  vested  in  the 
appellee,  who  is  entirely  unaffected  by  such  incapacity,  he  should 
be  deprived  of  what  was  intended  to  be  part  of  the  mortgage  se- 
curity. The  inability  of  the  Safe  Deposit  Company  to  execute 
the  power  of  sale  did  not  arise  from  any  defect  in  the  power,  but 
from  the  infirmity  of  the  company  itself.  The  original  donees  of 
the  power  were  natural  persons  who  were  unaffected  by  any  dis- 
ability and  it  was  therefore  validly  created  as  an  incident  of  the 
mortgagee  state  and,  as  we  have  already  said,  it  formed  part  of 
the  security  itself  and  passed  with  the  estate  to  the  successive 
assignees  thereof.  It  must  upon  principle  be  held  to  have  been 
exercisable  by  all  such  assignees  except  in  so  far  as  they  may  by 
reason  of  their  own  disability  have  been  incapable  of  executing  it. 

The  order  appealed  from  will  be  affirmed. 

Order  affirmed  with  costs. 


728     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

MOWRY  V.  SANBORN 

Court  of  Appeals  of  New  York,  1877 

(68  N.  Y.  153) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  the  third  judicial  department  affirming  a  judgment  in 
favor  of  defendants,  entered  upon  a  decision  of  the  court  on  trial 
at  Special  Term.    (Reported  below,  7  Hun,  380.) 

This  was  an  action  of  ejectment  to  recover  possession  of  premises 
situated  in  Sandy  Hill,  Washington  county.  It  has  been  to  this 
court  once  before,  when  it  was  heard  and  decided  by  the  Commis- 
sion of  Appeals.    (See  mem.  of  decision,  65  N.  Y.  581.) 

Plaintiffs  claimed  title  under  a  statutory  foreclosure  by  adver- 
tisement of  a  mortgage  executed  by  defendant  and  wife  to  plain- 
tiff Mowry  as  president  of  the  Washington  County  Bank  and  by 
it  transferred  to  the  Washington  County  National  Bank,  by  whom 
the  mortgage  was  foreclosed.  The  said  bank  become  the  pur- 
chaser, and  subsequently  conveyed  to  plaintiffs.  The  mortgage 
was  for  the  sum  of  $3,000,  and  contained  the  following  condition 
and  covenant:  "But  this  conveyance  is  made  on  this  express  con- 
dition, that  if  the  said  Jesse  K.  Sanborn,  his  heirs,  executors,  ad- 
ministrators or  assigns  shall  and  do  pay  to  the  said  party  of  the 
second  part,  his  successor,  successors  or  assigns,  the  notes,  drafts 
or  other  commercial  paper  of  the  said  Jesse  K.  Sanborn,  or  on 
which  his  name  appears  as  maker,  drawer  or  indorser,  now  lield 
and  owned  by  said  Washington  County  Bank,  and  shall  also  pay 
any  notes,  drafts  or  other  commercial  paper  of  said  Sanborn,  or 
on  which  his  name  shall  appear  as  maker,  drawer  or  indorser, 
which  shall  be  hereafter  discounted,  received,  held  or  owned  by 
said  Washington  County  Bank;  but  this  mortgage  is  not  to  be 
security  for  over  three  thousand  dollars  at  any  one  time,  and  is 
not  to  extend  to  any  paper  received  or  discounted  after  three  years 
from  the  date  of  this  mortgage."  "And  the  said  Jesse  K.  Sanborn, 
for  himself,  his  heirs,  executors,  administrators  and  assigns,  cov- 
enants with  the  said  party  of  the  second  part,  his  successor,  suc- 
cessors and  assigns  to  pay  the  said  notes,  drafts  and  other  com- 
mercial paper,  and  the  interest  thereon  at  the  times  limited  for  the 
[payment  thereof  as  aforesaid;  and  that  in  case  of  non-payment 
of  the  interest,  or  any  part  thereof,  at  the  time  or  times  limited 
for  the  payment  thereof,  or  within  three  days  thereafter,  then  all 


MOWRY    r.    SANBORN  729 

the  moneys  hereby  secured  which  leinaiii  unpaid,  shall,  at  the 
election  of  the  party  of  the  second  part,  his  successor,  successors 
and  assigns,  become  forthwith  due  and  payable;  and  in  case  of  the 
non-payment  of  said  notes,  drafts  and  other  conmiercial  paper, 
as  above  provided,  or  any  part  thereof,  at  the  times  limited  for 
the  payment  thereof,  it  shall  and  may  be  lawful  foi-  the  said  party 
of  the  second  part,  his  successor,  successors  and  assigns,  and  the 
said  party  of  the  first  part  does  hereby  empower  and  authorize 
the  said  party  of  the  second  part,  his  successor,  successors  and 
assigns  to  sell  the  said  premises,  with  the  appurtenances  or  any 
part  or  parts  thereof,  in  the  manner  prescribed  by  law,  and  out 
of  the  moneys  arising  from  such  sale  or  sales  to  retain  all  the  prin- 
cipal money  and  interest  remaining  unpaid  on  said  notes,  drafts 
and  other  commercial  paper,  and  the  costs,  charges  and  expense 
of  making  such  sale." 

Upon  the  trial  the  plaintiffs  produced  in  evidence  the  affidavits, 
etc.,  in  the  foreclosure  proceedings.  The  affidavit  of  service  of 
notice  of  foreclosure  was  made  by  the  attorney,  who  stated,  in 
substance,  that  service  was  made  upon  defendant  by  mailing 
notice  at  Greenwich,  addressed  to  him  as  follows:  "Jesse  K.  San- 
born, Sandy  Hill,  Washington  county,  N.  Y."  The  affidavit, 
after  stating  service  of  notice  by  mail  upon  other  persons,  con- 
tained this  clause:  "At  that  time  each  of  said  persons  resided,  as 
this  deponent  is  informed  and  believes,  at  the  respective  places  to 
which  their  said  notices  were  so  addressed." 

Plaintiff  proved  by  parol  evidence  that  defendant  did  reside  at 
Sandy  Hill  at  the  time  of  service  of  notice,  and  the  court  so  found. 

Defendant's  counsel  moved  for  a  nonsuit  and  for  judgment  on 
the  grounds,  among  others :  4.  That  there  is  no  sufficient  proof  of 
service  on  the  mortgagor.  6.  That  the  foreclosure  not  being  in 
conformity  to  the  statute,  was  void,  which  motion  was  denied. 
The  court  held  that  plaintiff  did  not  have  title. 

Andrews,  J.^  The  principal  question  in  the  case  is  the  one 
already  suggested,  viz.,  was  evidence  admissible  to  prove  that 
the  mortgagor  resided  at  Sandy  Hill  when  the  notice  was  mailed? 
or,  the  question  involved  is  still  more  comprehensive,  viz.,  when 
title  is  claimed  under  the  foreclosure  of  a  mortgage,  by  advertise- 
ment, may  the  fact  of  the  service  of  notice  of  sale,  upon  the  mort- 
gagor or  other  persons  affected  by  the  proceedings,  be  shown  iUi 
support  of  the  title,  by  any  competent  common-law  evidence,  ini 

*  Portions  of  opinion  omitted. 


) 


730     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

the  absence  of  an  affidavit  showing  such  service?  The  right  of  a 
mortgagee  to'  extinguish  the  equity  of  redemption  by  a  sale  of 
the  land  without  judicial  proceedings  or  the  decree  of  the  court, 
depends  upon  the  existence  of  a  power  of  sale  in  the  mortgage  or 
other  instrument  executed  by  the  mortgagor.  If  a  power  of  sale 
is  not  given,  the  mortgagee  must  resort  to  a  court  of  equity  to 
enforce  the  mortgage.  This  principle  of  the  common  law  has  been 
retained  in  the  statute  for  the  foreclosure  of  mortgages,  by  ad- 
vertisement, which  only  authorizes  this  proceeding  in  cases  where 
the  mortgage  contains  a  power  of  sale.    (2  R.  S.,  545,  §  1.) 

In  the  absence  of  a  statute  regulating  the  mode  of  executing  the 
power  the  mortgagee  may  sell  the  land  at  public  or  private  sale, 
unless  the  particular  manner  of  sale  is  prescribed  by  the  instru- 
ment creating  the  power  (Davey  v.  Durant,  1  De  Gex  and  J.,  535; 
2  Wash,  on  Real  Prop.,  77),  in  which  case  the  mortgagee  must,  in 
executing  the  power,  conform  to  the  conditions  imposed.  The 
mortgagee  could  not  at  common  law  become  the  purchaser  on  a 
sale  made  by  himself  under  the  power,  or  at  least  such  a  sale  was 
voidable  at  the  election  of  the  mortgagor.  He  could  not  at  the 
same  time  be  a  trustee  of  the  power  of  sale,  and  a  purchaser  under 
it.  (iSug.  on  Vend.  94;  3  irf.  229;  Wash,  on  Real  Prop.  77.)  And, 
where  a  sale  was  made  under  the  power  a  deed  from  the  mortgagee 
to  the  purchaser  was  necessary  to  pass  the  title.  (Arnot  v.  McClure, 
4  Den.  44.) 

The  mortgagee  under  the  law  of  England  has  the  legal  title  to  the 
mortgaged  premises,  and  under  our  law  it  remains  in  the  mort- 
gagor until  foreclosure,  but  in  either  case  a  deed  is  necessary  to 
satisfy  the  statute  of  frauds,  and  to  vest  the  title  in  the  purchaser, 
unless  the  legislature  has  interfered  and  created  an  exception,  or 
has  substituted  some  other  evidence  of  title  in  place  of  a  common- 
law  conveyance. 

When  a  power  of  sale  is  given  to  be  executed  under  certain  con- 
ditions, or  its  execution  is  made  by  the  terms  of  the  power  to  de- 
pend upon  the  performance  of  precedent  acts,  and  the  validity  of 
a  conveyance  made  in  assumed  execution  of  the  power  is  in  ques- 
tion, oral  evidence  of  a  compliance  with  the  conditions,  is  admis- 
sible, unless  such  proof  is  excluded  by  the  nature  of  the  conditions 
imposed,  or  the  terms  of  the  power.  In  Hawley  v.  Bennett,  (5  Paige, 
104),  entries  in  the  register  of  an  attorney,  who  conducted  a  fore- 
closure by  advertisement,  were  admitted  after  his  death  in  sup- 
port of  the  title  under  a  deed  given  on  the  foreclosure,  to  show  a 
compliance  with  the  statute,  and  the  circumstances  of  the  sale. 


MO  WRY   V.    SANBORN  731 

The  foreclosure  was  before  the  statute  of  1808,  which  made  af- 
fidavits of  the  parties,  etc.,  prima  facie  evidence,  and  in  Arnot  v. 
McClure,  Bronson,  Ch.  J.,  says:  "Before  we  had  any  such  statute 
the  regularity  of  the  proceedings  could  only  be  established  by 
common-law  evidence;  and  any  kind  of  common-law  evidence 
was  admissible."  When  the  title  to  real  estate  is  claimed  under  a 
conveyance  purporting  to  be  made  in  execution  of  a  power,  which 
by  its  terms  is  to  be  exercised  in  a  certain  event  or  after  notice  to 
the  grantor  or  third  person,  or  the  doing  of  any  other  act  by  the 
grantee  of  the  power,  oral  evidence  of  the  happening  of  the  event 
or  of  the  performance  of  the  condition  precedent,  does  not  add 
to,  vary,  or  contradict  the  deed,  but  is  consistent  with  it,  and  is 
admissible  to  show  that  the  grantee  of  the  power  acted  within  his 
authority. 

The  statute  for  the  foreclosure  of  mortgages  by  advertisement 
was  passed  to  regulate  the  mode  of  executing  the  power  of  sale, 
when  given  in  the  mortgage.  The  statute  as  originally  enacted, 
provided  for  notice  of  the  sale  to  be  given  by  publication  and 
posting  (1  R.  L.  376),  and  in  1844,  the  statute  was  amended  by 
requiring  in  addition,  that  the  notice  should  be  served  personally 
or  by  mail  on  the  mortgagor  (chap.  346,  Laws  of  1844,  §  5),  and 
in  1857  the  statute  was  further  amended  providing  that  a  copy  of 
the  notice  should  be  delivered  to  the  county  clerk,  to  be  affixed 
in  a  book  in  his  office,  and  that  an  entry  of  the  time  of  receiving 
and  affixing  it  should  be  made.  (Chap.  308,  Laws  of  1857.)  All 
these  several  acts  required  to  be  done,  were  parts  of  the  notice 
to  be  given,  and  were  to  be  performed  prior  to  the  sale,  at  the  times 
specified  in  the  statute.  These  statute  requirements  were  condi- 
tions precedent  to  a  valid  sale  under  the  power  and  have  the  same 
effect  as  if  they  were  inserted  in  the  mortgage,  and  a  person  claiming 
title  under  a  statute  foreclosure,  assumes  the  burden  of  show- 
j  ing  that  they  were  performed.  But  unless  the  statute  has  other- 
l  wise  provided,  it  seems  not  to  admit  of  doubt  that  the  publica- 
ition,  posting  and  service  of  notice  on  the  mortgagor  and  other 
Ipersons  can  be  proved  by  oral  testimonj-,  in  fact  this  would  usually 
jbe  the  only  available  proof.  The  legislature,  by  an  act  passed  in 
April,  1808,  first  made  the  affidavits  of  the  printer,  etc.,  when 
recorded  prima  facie  evidence  of  the  publication  and  posting  of 
the  notice  of  sale,  and  of  the  circumstances  of  the  sale.  This  was 
an  innovation  upon  the  common-law  rules  of  evidence,  and  the 
object  of  the  statute  was  to  enable  the  purchaser  to  perpetuate  the 
evidence  of  the  facts  upon  which  the  validity  of  the  sale  depended. 


732     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

The  same  statute  authorized  the  mortgagee  to  purchase,  and  both- 
of  the  provisions  referred  to  were  embodied  in  the  act  concerning 
mortgages.  (Chapter  22  of  the  Laws  of  1813 ;  1  R.  S.  374,  §§  7-10.) 
The  sixth  section  of  that  act  contemplates  that  a  deed  should  be 
given  to  the  purchaser  on  the  sale,  and  until  the  act  of  1838,  which 
will  be  hereafter  referred  to,  this  was  necessary  to  pass  the  title, 
except  where  the  mortgagee  was  the  purchaser.  In  that  case  no^ 
deed  could  be  given,  as  the  mortgagee  could  not  convey  to  himself, 
but  as  the  statute  expressly  recognized  his  right  to  purchase,  and 
made  no  provision  for  a  conveyance,  the  court  held  in  Jackson  v. 
Colden,  (4  Cow.  266),  that  on  a  purchase  by  the  mortgagee,  the 
title  passed  by  force  of  the  statute,  without  a  deed.  Some  effect 
appears  to  have  been  given  to  the  fact  that  affidavits  had  been 
made  and  recorded,  showing  a  sale  to  the  mortgagee. 

In  the  revision  of  1830,  an  entirely  new  provision  was  inserted 
in  the  statute,  being  section  12,  now  section  14,  for  the  purpose,, 
as  the  revisers  say,  of  removing  doubts  which  had  been  excited 
respecting  the  evidence  of  title  acquired  on  a  purchase  by  a  mort- 
gagee, and  to  "declare  the  law  as  now  understood."  (5th  Ed.  St. 
764.)  That  section  as  originally  passed  provided  that  when  the 
mortgaged  premises  were  purchased  on  the  sale  by  the  mortgagee, 
his  legal  representatives  or  assigns,  the  "affidavits  of  the  publica- 
tion and  affixing  notice  of  sale,  and  of  the  circumstances  of  the 
sale,  shall  be  evidence  of  the  sale  and  of  the  foreclosure  of  the 
equity  of  redemption  as  herein  specified,  without  any  conveyance 
being  executed,  in  the  same  manner,  and  with  the  like  effect  as  a 
convej'ance  executed  by  a  mortgagee  upon  such  sale  to  a  third 
person."  This  section  came  under  the  consideration  of  the  court 
in  Arnot  v.  McChire.  In  that  case  the  assignee  of  a  mortgage, 
foreclosed  it  under  the  statute  and  became  the  purchaser,  and 
affidavits  of  publication  and  posting  of  the  notice,  and  of  the  cir- 
cumstances of  the  sale  were  made  and  recorded.  In  the  affidavit 
of  the  circumstances  of  the  sale,  the  boundaries  of  the  property 
sold  as  therein  given,  did  not  embrace  a  portion  of  the  mortgaged 
premises,  and  oral  proof  was  offered  to  show,  that  in  fact,  the 
whole  premises  were  sold,  and  that  the  portion  not  embraced  in 
the  description  in  the  affidavit  was  by  mistake  omitted.  The 
jiroof  was  rejected  on  the  trial,  and  on  appeal  the  ruling  was  af- 
firmed. The  court  held,  in  an  opinion  by  Bronson,  Ch.  J.,  that 
affidavits  were  necessary  to  complete  the  title  when  the  mortgagee 
or  his  assignee  was  the  purchaser  on  the  foreclosure;  that  in  that 
case,  as  no  deed  could  be  given,  the  affidavits  were,  by  the  true  con- 


MOWRY    V.    SANBORN  733 

struction  of  section  14,  to  have  the  force  and  effect  of  a  conveyance 
by  the  mortgagee  to  a  third  person,  "and  to  perform  the  double 
office  of  proving  the  regularity  of  the  proceedings  to  foreclose, 
and  standing  as  a  conveyance  to  the  purchaser;"  and  from  these 
provisions  the  conclusion  was  reached  that  the  mortgagee,  or  his 
assignee,  could  not  be  permitted,  by  oral  proof,  to  contradict, 
impeach,  or  supply  an  omission  or  defect  in  the  affidavits  "any 
more  than  he  could  a  conveyance  by  deed."  Section  II  was  an 
important  addition  to  the  previous  law.  As  construed  in  Arnot  v. 
McClure  it  resolved  the  doubt  which  existed  under  the  statute  as 
it  previously  stood,  and  affirmed  the  general  policy  of  the  law 
which  does  not  permit  a  title  to  real  estate  to  pass  without  a  con- 
veyance in  writing,  by  declaring  that  the  affidavits  mentioned 
should,  when  the  mortgagee  became  the  purchaser,  stand  for  a 
conveyance  of  the  land.  This  section  was  amended,  in  1838,  by 
*  allowing  a  substitution  of  the  affidavits,  specified  therein,  in  all 
cases,  in  place  of  a  deed ;  but  when  the  purchaser  was  a  third  per- 
son a  deed  might  still  be  given  and  the  title  supported  by  oral 
proof  of  a  compliance  with  the  provisions  of  the  statute.  {Arnot  v. 
McClure.) 

In  the  case  now  before  us  the  assignee  of  the  Sanborn  mortgage 
became  the  purchaser  on  the  foreclosure;  affidavits  of  the  publica- 
tion and  posting  of  the  notice  of  sale  and  of  the  circumstances  of 
the  sale  were  made  and  recorded  and  were  produced  on  the  trial, 
together  with  the  affidavit  of  notice  of  service  on  the  mortgagor, 
which  the  Commission  of  Appeals  decided  to  be  defective  in  the 
respect  before  mentioned.  It  is  very  clear,  I  think,  that  oral  proof 
was  admissible  to  establish  the  omitted  fact,  viz.,  that  the  mort- 
gagor, when  the  notice  was  served,  resided  at  Sandy  Hill,  unless 
the  affidavit  of  service  was  a  part  of  the  statute  conveyance  pro- 
vided for  in  section  14.  It  cannot  be  so  held  unless  we  can  incor- 
porate into  that  section,  with  the  other  affidavits  mentioned,  the 
affidavit  of  service  which  was  first  provided  for  in  1844;  and  if 
this  can  be  done,  the  affidavit  of  affixing  the  notice  in  the  books  of 
the  county  clerk,  provided  for  by  the  act  of  1857,  must  also  be 
deemed  included.  Neither  of  these  affidavits  are  specified  in  the 
section.  If,  when  section  14  was  passed,  notice  had  been  required 
to  be  served  on  the  mortgagor  and  to  be  put  in  the  books  of  the 
clerk,  it  is  very  probable  that  the  affidavits  of  these  facts  would 
have  been  made  a  part  of  the  statute  conveyance.  It  would  cer- 
tainly contribute  to  the  symmetry  and  completeness  of  the  system, 
and  to  the  security  of  foreclosure  titles,  that  all  the  prerequisites 


734     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

to  a  valid  foreclosure  should  be  shown  by  affidavits,  and  made  a 
part  of  the  statutor\^  title.  But  we  can  see  no  justification  for 
construing  section  14  as  it  stands,  as  if  the  affidavits  of  service  and 
of  affixing  notice  in  the  books  of  the  clerk,  were  mentioned  in  it. 
The  argument  that  such  a  construction  would  be  a  protection 
against  frauds  and  prejudices,  will  not  justify  it.  In  Tuthill  v. 
Tracy,  (31  N.  Y.  157),  it  was  held  that  a  sale  made  pursuant  to 
the  statute  bars  the  equity  of  redemption,  without  affidavits  being 
made,  and  if  now  a  deed  is  given  on  the  sale,  without  affidavits, 
the  facts  (according  to  the  opinion  in  Arnot  v.  McClure)  of  publi- 
cation, posting,  etc.,  may  be  established  by  oral  evidence.  In  each 
of  these  cases  the  danger  of  fraud  and  perjury,  is  the  same  as  is 
suggested  here. 

The  production  of  the  affidavits  mentioned  in  section  14,  with- 
out proof  of  service  on  the  mortgagor,  or  of  affixing  notice  in  the 
clerk's  office,  are  not,  since  the  amendments  of  1844  and  1857,  * 
evidence  of  a  complete  foreclosure.  By  the  eighth  section,  it  is  a 
sale  conducted  as  ''herein  prescribed,"  which  bars  the  equity  of 
redemption,  and  the  party  claiming  title  under  the  foreclosure 
would  be  bound  to  show  all  the  facts  necessarj''  to  a  valid  sale 
before  he  could  recover  under  it,  and  we  think  the  true  construc- 
tion of  the  fourteenth  section  in  this  respect  is,  that  the  affidavits 
therein  mentioned,  when  no  deed  has  l)een  executed,  are  evidence 
in  the  same  manner,  and  to  the  same  extent  of  a  foreclosure  as 
they  would  be  if  a  deed  had  been  executed. 

We  are  of  opinion,  for  the  reasons  stated,  that  the  oral  evidence 
of  the  residence  of  the  mortgagor  at  the  time  the  notice  was  served 
was  competent  and  should  have  been  considered  by  the  learned 
judge  on  the  trial. 

We  think  the  judgment  should  be  reversed  on  the  point  first 
considered,  and  a  new  trial  granted.  .  . 

All  concur. 

Church,  Ch.  J.,  Allen  and  Rapallo,  JJ.,  were  also  of  opinion 
that  the  affidavit  of  service  was  sufficient. 

Judgment    reversed.  ^ 


New  York  Code  Civ.  Proc,  §  2387.  When  mortgage  may  he 
foreclosed.  A  mortgage  upon  real  property,  situated  within  the 
State,  containing  therein  a  power  to  the  mortgagee,  or  any  other 

1  See  also.  Van  Vleck  v.  Ems,  88       Hun  (N".  Y.),  348,  34  N.  Y.  Supp.  754 

(1895). 


NEW    YORK    CODE    CIVIL    PROCEDURE  735 

person,  to  sell  the  mortgaged  property,  upon  default  being  made 
in  a  condition  of  the  mortgage,  may  be  foreclosed,  in  the  man- 
ner prescribed  in  this  title,  where  the  following  requisites 
concur: 

1.  Default  has  been  made  in  a  condition  of  the  mortgage, 
whereby  the  power  to  sell  has  ])ecome  operative. 

2.  An  action  has  not  been  brought  to  recover  the  del)t  secured 
by  the  mortgage,  or  any  part  thereof;  or,  if  such  an  action  has  been 
brought,  it  has  been  discontinued,  or  final  judgment  has  been 
rendered  therein  against  the  plaintiff,  or  an  execution,  issued  upon 
a  judgment  rendered  therein  in  favor  of  the  plaintiff  has  been 
returned  wholly  or  partly  unsatisfied. 

3.  The  mortgage  has  been  recorded  in  the  proper  book  for  re- 
cording mortgages,  in  the  county  wherein  the  property  is  situated. 

§  2388.  Notice  of  sale;  how  given.  The  person  entitled  to  exe- 
cute the  power  of  sale,  must  give  notice,  in  the  following  manner, 
that  the  mortgage  will  be  foreclosed,  by  a  sale  of  the  mortgaged 
property,  or  a  part  thereof,  at  a  time  and  place  specified  in  the 
notice: 

1.  A  copy  of  the  notice  must  be  published,  at  least  once  in  each 
of  the  twelve  weeks,  immediately  preceding  the  day  of  sale,  in  a 
newspaper  published  in  the  county  or  in  a  municipal  corporation 
a  part  of  which  is  within  the  county  in  which  the  property  to  be 
sold,  or  a  part  thereof,  is  situated. 

2.  A  copy  of  the  notice  must  be  fastened  up,  at  least  eighty- 
four  days  before  the  day  of  sale,  in  a  conspicuous  place,  at  or  near 
the  entrance  of  the  building,  where  the  county  court  of  each  county, 
wherein  the  property  to  be  sold  is  situated,  is  directed  to  be  held; 
or,  if  there  are  two  or  more  such  buildings  in  the  same  county, 
then  in  a  like  place,  at  or  near  the  entrance  of  the  building  nearest 
to  the  property;  or,  in  the  city  and  county  of  New  York,  in  a  like 
place,  at  or  near  the  entrance  of  the  building  where  the  trial  and 
special  terms  of  the  supreme  court  of  the  first  judicial  district  are 
directed  by  law  to  be  held. 

3.  A  copy  of  the  notice  must  be  delivered,  at  least  eighty-four 
days  before  the  day  of  sale,  to  the  clerk  of  each  county,  wherein 
the  mortgaged  property,  or  any  part  thereof,  is  situated. 

4.  A  copy  of  the  notice  must  be  served,  as  prescribed  in  the  next 
section,  upon  the  mortgagor,  or,  if  he  is  dead,  upon  his  executor  or 
administrator,  if  an  executor  or  administrator  has  been  appointed, 
and  also  upon  his  heirs,  providing  he  died  the  owner  of  the  mort- 
gaged premises.    A  copy  of  the  notice  may  also  be  served,  in  a 


736     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

like  manner,  upon  a  subsequent  grantee  or  mortgagee  of  the 
property,  whose  conveyance  was  recorded,  in  the  proper  office 
for  recording  it  in  the  county,  at  the  time  of  the  first  pubhcation 
of  the  notice  of  sale;  upon  the  wife  or  widow  of  the  mortgagor,  and 
the  wife  or  widow  of  each  subsequent  grantee  whose  conveyance 
was  so  recorded,  then  having  an  inchoate  or  vested  right  of  dower, 
or  an  estate  in  dower,  subordinate  to  the  hen  of  the  mortgagee; 
or  in  the  event  of  the  death  of  the  subsequent  grantee  who  was  at 
the  time  of  his  death  the  owner  of  the  mortgaged  premises,  then 
upon  his  heirs;  or  upon  any  person,  then  having  a  hen  upon  the 
property,  subsequent  to  the  mortgage  by  virtue  of  a  judgment  or 
decree  duly  docketed  in  the  county  clerk's  office  and  constituting 
a  specific  or  general  hen  upon  the  property.  The  notice,  specified 
in  this  section,  must  be  subscribed  by  the  person  entitled  to  execute 
the  power  of  sale,  unless  his  name  distinctly  appears  in  the  body 
of  the  notice,  in  which  case  it  may  be  subscribed  by  his  attorney 
or  agent. 

§  2391.  ConteMs  of  notice  of  sale.  The  notice  of  sale  must 
specify : 

1.  The  names  of  the  mortgagor,  of  the  mortgagee  and  of  each 
assignee  of  the  mortgage. 

2.  The  date  of  the  mortgage,  and  the  time  when,  and  the  place 
where,  it  is  recorded. 

3.  The  sum  claimed  to  be  due  upon  the  mortgage,  at  the  time  of 
the  first  publication  of  the  notice;  and,  if  any  sum  secured  by  the 
mortgage  is  not  then  due,  the  amount  to  become  due  thereupon. 

4.  A  description  of  the  mortgaged  property,  conforming  sub- 
stantially to  that  contained  in  the  mortgage. 

§  2392.  Sale;  how  postponed.  The  sale  may  be  postponed,  from 
time  to  time.  In  that  case,  a  notice  of  the  postponement  must  be 
published,  as  soon  as  practicable  thereafter,  in  the  newspaper  in 
which  the  original  notice  was  published ;  and  the  pubhcation  of  the 
original  notice,  and  of  each  notice  of  postponement,  must  be  con- 
tinued, at  least  once  in  each  week,  until  the  time  to  which  the  sale 
is  finally  postponed. 

§  2393.  Id.;  how  conducted.  The  sale  must  be  at  public  auction, 
in  the  daytime,  on  a  day  other  than  Sunday  or  a  public  hoUday, 
in  the  county  in  which  the  mortgaged  property,  or  a  part  thereof, 
is  situated ;  except  that,  where  the  mortgage  is  to  the  people  of  the 
State,  the  sale  may  be  made  at  the  Capitol.  If  the  property  con- 
sists of  two  or  more  distinct  farms,  tracts,  or  lots,  they  must  be 
sold  separately;  and  as  many  only  of  the  distinct  farms,  tracts,  or 


NEW    YORK    CODE    CIVIL    PROCEDURE  737 

lots,  shall  be  sold,  as  it  is  necessary  to  sell,  in  order  to  satisfy  the 
amount  due  at  the  time  of  the  sale,  and  the  costs  and  expenses 
allowed  by  law.  But  where  two  or  more  buildings  are  situated 
upon  the  same  city  lot,  and  access  to  one  is  obtained  through  the 
other,  they  must  be  sold  together. 

§  2394.  Mortgagee,  etc.,  mmj  ptirchase.  The  mortgagee,  or  his 
assignee,  or  the  legal  representative  of  either,  may,  fairly  and  in 
good  faith,  purchase  the  mortgaged  property,  or  any  part  thereof, 
at  the  sale. 

§  2395.  Effect  of  sale.  A  sale,  made  and  conducted  as  prescribed 
in  this  title,  to  a  purchaser  in  good  faith,  is  equivalent  to  a  sale, 
pursuant  to  judgment  in  an  action  to  foreclose  the  mortgage,  so 
far  only  as  to  be  an  entire  bar  of  all  claim  or  equity  or  redemption, 
upon,  or  with  respect  to,  the  property  sold,  of  each  of  the  following 
persons : 

1.  The  mortgagor,  his  heir,  devisee,  executor  or  administrator. 

2.  Each  person  claiming  under  any  of  them,  by  virtue  of  a  title 
or  of  a  lien  by  judgment  or  decree,  subsequent  to  the  mortgage, 
upon  whom  the  notice  of  sale  was  served,  as  prescribed  in  this  title. 

3.  Each  person  so  claiming,  whose  assignment,  mortgage,  or 
other  conveyance  was  not  duly  recorded  in  the  proper  book  for 
recording  the  same  in  the  county,  or  whose  judgment  or  decree 
was  not  duly  docketed  in  the  county  clerk's  office,  at  the  time  of 
the  delivery  of  a  copy  of  the  notice  of  said  sale  to  the  clerk  of  the 
county;  and  the  executor,  administrator,  or  assignee  of  such  a 
person. 

4.  Every  other  person,  claiming  under  a  statutory  Hen  or  in- 
cumbrance, created  subsequent  to  the  mortgage,  attaching  to  the 
title  or  interest  of  any  person,  designated  in  either  of  the  foregoing 
subdivisions  of  this  section. 

5.  The  wife  or  widow  of  the  mortgagor,  or  of  a  subsequent 
grantee,  upon  whom  notice  of  the  sale  was  served  as  prescribed  in 
this  title,  where  the  lien  of  the  mortgage  was  superior  to  her  con- 
tingent or  vested  right  of  dower,  or  her  estate  in  dower. 


738     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

(d)  Foreclosure  by  Equitable  Action 

STEVENS  V.  THEATRES,  LIMITED 

Supreme  Court  of  Judicature — Chancery  Division,  1903 

(L.  R.  [1903]  1  Ch.  857) 

On  February  20,  1896,  the  defendant  company,  Theatres, 
Limited,  executed  a  mortgage  of  a  theatre  and  other  properties 
to  the  plaintiff  Stevens.  The  mortgage  contained  a  power  of  sale. 
On  September  14,  1897,  the  plaintiff  commenced  an  action  by 
summons  for  the  foreclosure  of  his  mortgage,  and  on  November  26, 
1897,  an  order  was  made  for  foreclosure  nisi.  This  order  was  in 
the  common  form  directing  accounts,  and  directing  the  plaintiff 
to  reconvey  the  property  on  payment  of  what  should  be  found  due. 
The  accounts  were  not  proceeded  with,  and  no  master's  certificate 
had  been  made.  On  December  3,  1897,  the  mortgagee  gave  notice 
to  the  mortgagor  that  he  intended  to  sell,  and  on  December  17, 

1897,  he  entered  into  a  contract  to  ^ell  to  Drucker.    On  February  3, 

1898,  he  convej^ed  to  Drucker  in  exercise  of  the  power  of  sale 
in  his  mortgage,  and  in  August,  1899,  Drucker  sold  and  conveyed 
to  Miss  Kate  Santley.  Miss  Kate  Santley  was  afterwards,  on  her 
own  application,  made  a  party  to  the  foreclosure  action,  and  the 
action  was  brought  on  for  the  decision  of  the  following  agreed 
point  of  law:  ''Whether,  assuming  that  apart  from  the  order  of 
26th  November,  1897,  the  plaintiff  Stevens  had,  by  virtue  of  the 
mortgage  of  the  20th  February,  1896,  a  power  of  sale  exercisable 
on  the  17th  December,  1897,  he  was  prevented  from  exercising 
such  power  by  reason  of  the  existence  of  the  order  of  the  26th 
November,  1897." 

Farwell,  J.  This  application  raises  a  neat  abstract  point  of  law, 
on  which  I  am  told  there  is  no  authority:  this  may  be  because 
powers  of  sale  were  not  usually  inserted  in  mortgages  until  seventy 
or  eighty  years  ago:  see  Clarke  v.  Royal  Panopticon,  [1857]  4  Drew. 
26.  [His  Lordship  then  stated  the  facts  of  the  case  and  the  agreed 
question  as  above,  and  proceeded: — ] 

I  propose  to  qualify  my  answer  to  that  question  in  order  to  pre- 
serve any  rights  that  Miss  Santley  may  have  as  a  purchaser  for 
value  without  notice,  if  she  can  hereafter  prove  that  she  is  in  that 
position. 

Now  this  question — whether  a  decree  for  foreclosure  directing 


STEVENS    V.    THEATRES,    LIMITED  739 

accounts  and  reconveyance,  or,  by  parity  of  reasoning,  a  decree  for 
redemption  directing  accounts  and  reconveyance,  (tn  payment, 
operates  to  prevent  the  exercise  of  the  power  of  sale  in  the  mort- 
gage, or  that  given  by  the  statute — has  to  be  decided  on  principle 
in  the  absence  of  authority.  The  first  proposition,  which  I  think 
is  plain,  is  this— neither  the  mortgagee  nor  the  mortgagor  is  en- 
titled to  dismiss  his  action,  or  to  discontinue  after  judgment.  The 
general  principle  on  which  the  Court  acts  with  regard  to  actions 
of  this  sort  is  to  regard  the  plaintiff  as  dominus  litis  until  judg- 
ment; but  if,  and  so  far  as  the  judgment  operates  for  the  benefit, 
not  merely  of  himself,  but  of  some  one  else,  he  cannot  get  rid  of  his 
action  mero  motu  after  judgment.  If  authority  is  necessary,  I 
refer  to  Taylor  v.  Mostyn,  25  Ch.  D.  48,  and  the  Exchange  and  Hop 
Warehouses,  Liniited  v.  Association  of  Land  Financiers,  34  Ch.  D. 
195. 

Now,  if  the  plaintiff  cannot  get  rid  of  his  action  after  judgment 
because  the  judgment  is  for  the  benefit  also  of  the  defendants,  it 
must  follow  that  he  cannot  in  any  way  vary  the  form  of  that  judg- 
ment by  doing  an  act  which  would  put  it  out  of  his  power  to  per- 
form that  which  the  Court  has  directed  him  to  do  as  the  condition 
of  getting  the  judgment. 

The  mortgagee  has  got  his  title  absolute  at  law,  but  the  mort- 
gagor has  his  right  of  redeeming,  and  the  mortgagee  has  the  right 
to  come  to  this  Court  and  say,  "Put  an  end  to  that  power."  The 
Court  regards  with  impartiality  both  mortgagor  and  mortgagee. 
It  does  not  deprive  the  mortgagee  of  his  legal  rights  without  giving 
him  corresponding  benefits,  nor  does  it  deprive  the  mortgagor  of 
his  right  to  redeem  without  giving  him  an  opportunity  of  paying 
what  is  due  when  the  sum  is  finally  ascertained.  When  the  parties 
have  once  taken  the  judgment  of  the  Court  neither  party,  in  my 
opinion,  is  entitled  without  the  leave  of  the  Court  to  put  it  out  of 
his  own  power,  by  any  act  of  his  own,  to  obey  the  judgment  of  the 
Court.  It  is  said  to  be  a  hardship  on  the  mortgagee  that  the  mort- 
gagor by  commencing  proceedings  for  redemption  and  getting  hi; 
judgment  can  prevent  the  exercise  of  the  power  of  sale.  So  far  as 
commencing  proceedings  is  concerned  it  is  clear  that  that  does 
not  prevent  the  exercise  of  the  power  of  sale.  That  is  decided  by 
Adams  v.  Scott,  7  W.  R.  213.  So  far  as  regards  any  hardship  from 
the  judgment  of  the  Court,  the  Court  may  be  trusted,  I  hope,  not 
to  make  any  decree  which  will  operate  harshly  or  unfairly  on  either 
party.  In  the  case  suggested  in  argument,  if  the  mortgagee  is  on 
the  point  of  entering  into  a  contract  to  sell  a  property  which  is 


s 


740     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

difficult  to  dispose  of,  or  an  insufficient  security,  I  apprehend  the 
Court  would  take  that  into  consideration  before  it  made  a  decree 
for  redemption,  and  it  might  possibly,  instead  of  ordering  redemp- 
tion or  in  addition  thereto,  give  some  direction  for  carrying  out 
that  particular  sale.  I  am  not  pressed  with  that  difficulty,  because 
it  appears  to  me  to  be  a  difficulty  which  assumes  a  certain  want  of 
perception  and  power  on  the  part  of  the  Court  of  which  I  should  be 
unwilling  to  admit  it  was  guilty.  Nor  is  there  any  hardship  in 
delay  in  prosecuting  accounts  and  inquiries,  for  either  side  can 
come  to  the  Court  and  say,  "It  is  no  use  keeping  this  hanging  over 
us;  let  us  stay  all  further  proceedings,"  as  was  done  in  the  Ex- 
change and  Hop  Warehouses  Case,  34  Ch.  D.  195. 

I  hold,  therefore,  that  the  power  of  sale  cannot  be  exercised  after 
the  judgment  nisi  without  the  leave  of  the  Court,  because  it  preju- 
dices the  rights  given  to  the  mortgagor  by  the  Court  under  the 
direction  to  reconvey.  The  question  next  arises,  What  is  the  effect 
of  the  order  of  the  Court?  Does  this  extinguish  the  power  or  does 
it  not?  That  would  affect  materially  the  case  of  Miss  Santley, 
if  she  can  prove  herself  to  be  a  purchaser  for  value  without  notice 
having  the  legal  estate.  In  my  opinion  the  power  of  sale  is  not 
extinguished.  It  is  important  to  remember  that  the  mortgagor 
can  institute  proceedings  for  and  obtain  redemption  almost  as  a 
matter  of  course.  If  the  decree  nisi  for  redemption  absolutely 
extinguished  the  power  of  sale,  it  would  surely  have  been  urged  in 
argument  or  taken  into  consideration  in  some  case  as  a  reason 
against  granting  such  a  decree;  but  no  trace  of  any  such  case  can 
be  found.  If  the  power  is  once  extinguished  it  must  be  gone  for 
ever;  but  I  think  this  would  be  inconsistent  with  the  view  taken  by 
the  Lords  Justices  in  Watson  v.  Marston,  4  D.  M.  &  G.  230.  That 
was  a  case  of  specific  performance,  and  the  Court  declined  to  force 
the  vendor  to  convey  as  the  purchaser  desired  in  exercise  of  his 
power  of  sale  after  a  decree  for  foreclosure  absolute.  The  condi- 
tion of  sale,  to  some  extent,  held  out  that  course  as  available,  be- 
cause the  vendor  was  described  as  a  mortgagee  with  power  of  sale. 
But  the  ground  on  which  it  was  put  was  hardship  on  the  vendor, 
who  by  exercising  the  power  of  sale  would  open  the  foreclosure. 
It  is  true  that  in  the  course  of  the  argument  Knight  Bruce,  L.  J., 
makes  an  obiter  observation  that  the  purchaser  might  be  preferring 
a  bad  to  a  good  title;  but  it  is  merely  a  suggestion,  and  I  do  not 
find  that  the  Lords  Justices  ever  said  there  was  no  title  at  all  to 
sell  under  the  power  of  sale;  if  it  could  have  been  said  that  there  is 
no  such  power  existing,  it  would  have  been  a  short  answer  to  make  to 


STEVENS   V.    THEATRES,    LIMITED  Til 

a  man  who  was  insisting  on  having  a  conveyance  uncler  that  power. 
The  foreclosure  nisi,  in  my  opinion,  does  not  destroy  the  power; 
the  remedies  of  the  mortgagee  are  merely  suspended  for  the  purpose 
of  carrying  out  that  particular  relief  which  he  has  sought,  and 
would  remain  available  for  him,  if,  for  example  both  parties  were 
to  agree  that  all  the  proceedings  should  be  stayed,  or  the  Court 
should  order,  as  it  did  in  the  Exchange  and  Hop  War  houses  Case, 
34  Ch.  D.  195,  the  taking  of  the  account  to  be  stayed.  In  that 
case  the  direction  to  reconvej'  still  remained.  It  appears  to  me  it 
would  be  impossible  to  hold  that  the  power  of  sale  was  gone  by 
reason  of  that  direction  to  reconvey,  although  the  Court  had  said 
it  was  idle  to  go  on  with  the  accounts  because  the  balance  was  so 
enormously  against  the  mortgagor  that  it  was  useless. 

This  is  a  question  of  some  importance  to  purchasers,  because, 
assuming  there  is  no  lis  pendens  registered,  a  purchaser  buying  in 
good  faith  from  a  mortgagee  under  a  power  of  sale  would  find  he 
had  no  title  at  all  if  the  power  was  absolutely  extinguished.  I  do 
not  know  of  any  case  in  which  a  power  has  ever  been  held  to  be 
extinguished  by  reason  of  any  of  the  usual  decrees  of  the  Court, 
such  as  the  decree  for  administration.  Even  a  decree  for  dissolu- 
tion of  marriage  l)y  the  Court  does  not  of  itself  extinguish  the 
settlement  which  was  made  upon  the  marriage,  or  any  powers 
contained  therein.  A  decree  for  the  administration  of  the  trusts 
of  a  will  or  for  the  execution  of  the  trusts  of  a  settlement  does  not 
extinguish  the  power:  it  merel}^  requires  the  person  exercising  it  to 
come  for  the  leave  of  the  Court  before  he  does  it.  In  my  opinion, 
if  the  mortgagee  had  in  this  case  come  to  the  Court  he  might  have 
got  leave  to  exercise  the  power.  I  see  nothing  in  the  fact  that  s.  25, 
sul>s.  2,  of  the  Conveyancing  Act  gives  the  Court  a  power  of  sale 
inconsistent  with  leaving  in  existence  the  power  given  by  the  deed 
or  by  s.  19  of  the  Act.  The  power  of  sale  in  s.  19  is  given  only  to 
mortgagees  who  have  a  mortgage  by  deed,  whereas  the  power  of 
sale  by  the  Court  and  the  power  to  ask  the  Court  to  direct  a  sale 
under  s.  25  extends  to  equitable  mortgages  as  well.  There  is 
nothing  in  the  least  inconsistent  to  my  mind  between  the  two  sec- 
tions. 

The  result  is,  in  my  judgment,  that  the  mortgagee  could  not 
exercise  the  power  of  sale  without  the  leave  of  the  Court,  but  that 
the  power  of  sale  was  not  extinguished,  so  that  the  question  whether 
a  purchaser  from  a  mortgagee  got  a  good  title  or  not  will  depend 
on  whether  she  is  affected  with  notice  or  whether  she  got  the  legal 
estate  without  notice. 


742     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

The  declaration  finally  settled  was: — 

"That  the  mortgagee  could  not  exercise  his  power  of  sale  with- 
out the  leave  of  the  Court  so  as  to  give  a  good  title  to  any  one  other 
than  a  purchaser  for  value  without  notice.  But  this  is  not  to  pre- 
clude the  mortgagee  from  setting  up  any  other  equity  he  may  have 
in  any  action  brought  by  the  mortgagor." 


MOULTON   V.   CORNISH 
Court  of  Appeals  of  New  York,  1893 
(138  iV.  y.  133) 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme 
Court  in  the  fourth  judicial  department,  entered  upon  an  order 
made  November  17,  1891,  which  modified  and  affirmed,  as  modi- 
fied, a  judgment  in  favor  of  plaintiff  entered  upon  a  decision  of 
the  court  on  trial  at  Special  Term. 

This  was  an  action  for  the  foreclosure  of  a  mortgage. 

Maynard,  J.^  In  1886  the  plaintiff  was  the  owner  of  a  mort- 
gage, given  to  secure  the  payment  of  eighty-six  hundred  and  fifty 
dollars  and  interest,  upon  three  several  lots  of  land  in  the  town  of 
Floyd,  Oneida  county,  known  as  the  Klock,  Eells  and  Tavern  farms, 
and  the  defendant  was  the  owner  of  a  subsequent  mortgage  upon 
the  same  property  given  to  secure  the  payment  of  $2,500  and  in- 
terest, which,  with  the  assignments  to  him,  were  recorded  in  the 
Oneida  county  clerk's  office. 

On  May  16th,  the  plaintiff  commenced  an  action  in  the  Supreme 
Court  for  the  foreclosure  of  her  mortgage,  but  omitted  to  make  the 
defendant  a  party  thereto.  This  omission  was  not  intentional,  but 
the  plaintiff  was  misled  by  an  abstract  of  a  search  obtained  from  the 
clerk's  office,  from  which  it  might  have  been  fairly  inferred  that 
the  defendant's  assignment  was  one  in  a  series  of  transfers,  and  that 
the  title  to  his  mortgage  was  in  another,  who  was  made  a  defendant, 
and  who  appeared  from  the  abstract  to  be  a  subsequent  assignee. 
If  a  full  statement  of  the  search  in  the  usual  form  had  been  obtained 
by  the  plaintiff,  the  interest  of  the  defendant  in  the  mortgaged 
property  would  have  correctly  appeared.  The  action  resulted  in  a 
judgment  entered  December  27,  1888,  decreeing  a  foreclosure  of 

1  Portions  of  opinion  omitted. 


MOULTON    V.    CORNISH  743 

the  plaintiff's  mortgage,  and  a  sale  of  the  mortgaged  premises  l)y  a 
referee  pursuant  to  the  provisions  of  the  Code,  and  the  practice  of 
the  court  in  such  cases.  The  premises  were  first  advertised  by  the 
referee  to  be  sold  on  March  2,  1889.  Before  that  time  the  plaintiff 
discovered  that  the  defendant  was  a  necessary  party  to  the  com- 
plete foreclosure  of  her  mortgage,  and  she  procured  the  sale  to  be 
postponed  until  March  16th;  and  made  a  motion,  at  a  Special 
Term  held  at  Syracuse  on  that  day,  for  an  order  granting  her  leave 
to  amend  the  summons,  complaint,  lis  pendens  and  judgment  in 
the  action  by  inserting  therein  the  name  of  this  defendant,  and  ad- 
judging and  decreeing  that  he  be  forever  barred  and  foreclosed  of 
all  right,  title,  interest  and  equity  of  redemption  in  tlu^  mortgaged 
premises,  or  for  such  further  order  or  relief  as  the  court  might 
deem  proper  to  grant.  Upon  the  hearing  of  that  motion,  the  court 
made  an  order,  which  was  entered,  and  which  has  not  been  re- 
versed or  vacated,  directing  that  upon  payment  of  SIO  costs,  the 
plaintiff  might,  if  she  so  elected,  open  the  judgment  in  the  fore- 
closure suit,  and  aniend  the  summons,  complaint,  lis  -pendens  and 
all  subsequent  proceedings,  by  making  this  defendant  a  defendant 
in  that  action,  and  inserting  the  necessary  allegations  for  that  pur- 
pose, and  that  the  amended  summons  and  complaint  be  served 
on  him,  and  that  he  have  the  usual  time  to  answer.  The  plaintiff 
did  not  avail  herself  of  the  privilege  afforded  b}'  this  order,  and  on 
March  16,  1889,  the  referee  proceeded  to  sell  the  mortgaged  prem- 
ises. At  the  opening  of  the  sale,  and  before  selling,  the  referee 
announced  and  read  the  conditions  of  sale,  which  were  in  the  usual 
form,  except  the  last  paragraph,  which  was  in  these  words:  ''7. 
The  property  is  sold  free  and  clear  of  any  and  all  rights  of  dower, 
charge  or  lien  upon  the  same,  except  that  it  is  claimed  by  one 
Nehemiah  N.  Cornish  (the  defendant  in  this  action)  that  he  is  the 
owner  by  assignment,  of  a  mortgage  made  by  Ichabod  C.  Mc- 
intosh to  Miriam  M.  Kellogg,  covering  the  premises  in  question, 
dated  February  1st,  1878,  to  secure  the  payment  of  $2,500,  which 
mortgage  was  recorded  in  Oneida  county  clerk's  office  Febru- 
ary 13th,  1878,  and  is  a  second  lien  upon  said  mortgaged  premises. 
Cornish  has  not  been  made  a  party  defendant  to  this  action." 
The  plaintiff  bid  off  the  property  known  as  the  Tavern  farm,  and 
the  referee  on  the  same  day  executed  to  her  a  deed,  and  very  soon 
thereafter  she  went  into  possession.  The  sale  was  confirmed  on  the 
6th  of  April,  and  on  April  9th,  this  action  for  a  strict  foreclosure 
was  brought.  The  other  farms  were  bid  off  by  other  parties,  who 
have  not  been  made  defendants  in  this  action.    The  plaintiff  has 


744     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

recovered  a  judgment  which,  as  modified  by  the  General  Term,  de- 
crees, 1st,  that  the  defendant's  mortgage  is  an  existing  hen  on  the 
lands  purchased  by  plaintiff  upon  the  foreclosure  of  her  mort- 
gage, and  was  not  affected  by  such  foreclosure  because  not  made 
a  party  to  the  action;  2d,  that  if  the  defendant  desires  to  redeem 
the  land  bid  off  by  the  plaintiff  upon  her  mortgage,  he  shall  within 
ten  days  from  the  service  of  a  copy  of  the  judgment,  give  the  plain- 
tiff notice  of  his  desire  and  intent  to  do  so.  If  such  notice  is  not 
given  within  the  time  specified,  it  is  ordered  and  adjudged,  that 
the  defendant  and  all  persons  claiming  under  him,  do  stand  and  l)e 
forever  barred  and  foreclosed  of  and  from  all  right,  title,  interest 
and  equity  of  redemption  of,  in  and  to  such  premises,  and  all 
liens  which  he  may  have  had  thereon  at  the  time  of  the  commence- 
ment of  the  foreclosure  action,  by  virtue  of  his  mortgage  or  other- 
wise, are  to  be  adjudged  as  cut  off  and  foreclosed,  and  the  plaintiff 
shall  hold  the  title  thereto,  free  from  such  liens,  and  the  defendant 
shall  pay  the  costs  of  the  action;  3d,  if  the  defendant  gives  notice 
of  his  intention  to  redeem,  within  the  time  required,  the  plaintiff 
may  apply  on  notice  to  the  Special  Term,  for  the  appointment  of  a 
referee,  to  take  and  state  the  account  of  the  plaintiff,  and  to  de- 
termine her  interest  in  the  mortgage  debt,  as  applicable  to  the  lands 
bid  off  by  her,  and  the  referee's  report  shall  be  made  up  according 
to  certain  directions  contained  in  the  judgment,  and  shall  fix 
and  determine  the  amount  the  defendant  shall  be  required  to  pay 
upon  such  redemption,  and  the  amount  so  found  due  by  the  ref- 
eree, with  the  interest  thereon,  shall  be  paid  by  the  defendant 
within  six  months  from  the  service  of  a  copy  of  the  report,  and  if 
paid  within  such  time,  the  payment  shall  operate  as  a  redemption 
of  the  premises  from  the  plaintiff's  mortgage,  and  her  title  ac- 
quired at  the  sale  shall  become  vested  in  him,  and  she  shall,  by  a 
proper  conveyance,  convey  the  premises  to  him  free  and  clear  from 
the  lien  of  her  mortgage,  and  neither  party  shall  have  costs  of  the 
action;  but  if  the  defendant  fails  to  complete  the  redemption  in  the 
manner,  and  within  the  time  specified,  it  is  ordered  and  adjudged, 
that  the  lien  of  his  mortgage  is  cut  off  and  removed,  and  the  plain- 
tiff is  deemed  to  hold  the  premises  free  and  clear  of  such  lien,  and 
the  defendant  shall  pay  the  costs  of  the  action. 

The  material  facts  are  not  disputed,  and  we  are  of  the  opinion, 
that  upon  the  proofs  submitted  and  the  findings  of  the  trial  court, 
the  plaintiff  was  not  entitled  to  the  relief  granted  to  her  in  this 
judgment. 

The  equitable  remedy  known  as  a  strict  foreclosure  of  a  real 


MOTLTON    /'.    rORXISH  745 

property  mortgage,  has  never  been  recognized  in  this  state,  save 
in  a  very  limited  class  of  cases. 

In  England  it  was  the  prevailing  method  of  procedure,  until 
the  enactment  of  the  statutes  of  15  and  16  Victoria,  ch.  86  (§  48), 
known  as  the  Chancery  Improvement  Act.  It  had  its  root  in  the 
common-law  doctrine  that,  upon  the  execution  of  the  mortgage, 
the  mortgagee  acquired  the  fee  of  the  land,  and  upon  default  in 
payment,  a  right  to  the  possession,  and  the  mortgagor  had  no  es- 
tate or  interest  therein,  and  no  right  of  possession,  after  default 
had  been  made  in  the  payment  of  the  mortgage  debt.  The  mort- 
gagee's remedy  was  by  ejectment,  and  in  a  court  of  law  it  was  not 
an  available  defense  for  the  mortgagor  to  plead  that  he  was  willing 
and  ready  to  pay  the  debt,  if  he  had  once  suffered  a  default  to 
occur.  In  order  to  mitigate  the  hardships  of  this  relation,  equity 
permitted  the  mortgagor  and  his  privies  to  redeem  by  discharging 
the  mortgage  debt,  and  by  restoring  to  him  the  possession  of  the 
land  if  the  mortgagee  had  taken  possession.  As  it  might  be  un- 
certain whether  the  mortgagor  or  subsequent  lienors  would  ever 
avail  themselves  of  the  right  of  redemption,  it  was,  while  outstand- 
ing, a  serious  impediment  to  the  alienation  of  the  mortgaged  prop- 
erty, and  equity  would,  therefore,  entertain  an  action  to  compel 
the  parties  entitled  to  this  right,  to  exercise  it  by  paying  within  a 
reasonable  time,  the  amount  of  the  mortgage  debt,  or  be  forever 
barred  or  foreclosed  of  the  right  of  redemption;  and  in  case  of  re- 
demption, the  decree  provided  that  the  mortgagee  should  reconvey 
the  lands  to  the  mortgagor,  or  other  party  redeeming. 

This  proceeding  has  been  termed  a  strict  foreclosure,  but  it  is 
apparent  that  it  has  no  appropriate  place  in  a  system  of  laws  and 
jurisprudence  where  it  has  been  declared  that  the  mortgage  does 
not  operate  as  a  conveyance  of  the  legal  title,  but  is  only  a  chose  in 
action  constituting  .a  lien  upon  the  land  as  security  for  the  debt  or 
other  obligation  of  the  mortgagor.  The  courts  of  this  state  have 
refused  to  adopt  it  as  an  authorized  remedy  in  ordinary  cases, 
and  in  this  respect  have  followed  the  practice  of  the  civil,  rather 
than  of  the  common  law.  In  the  Am.  &  Eng.  Encyclopsedia  of 
Law  (vol.  8,  186-7,  tit.  Foreclosure)  it  is  stated  that  strict  fore- 
closure is  very  rarely  resorted  to  in  the  American  courts;  that  in 
a  large  majority  of  the  states  it  is  not  recognized;  that  in  two  it  is 
the  usual  mode  of  procedure;  and  that  in  six  of  the  states,  includ- 
ing New  York,  it  is  permitted  in  exceptional  cases. 

The  plaintiff  here  rests  her  right  to  this  remedy  principally 
upon  the  fact  that  she  was  the  owner  of  a  prior  mortgage,  which 


746     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

she  had  foreclosed,  and  that  she  became  the  purchaser  of  a  part  of 
the  mortgaged  property  at  the  foreclosure  sale,  and  that  the  de- 
fendant's subsequent  mortgage  was  not  cut  off  or  affected  by  the 
foreclosure,  because  she  did  not  make  him  a  party  to  the  fore- 
closure action.  Before  the  sale  occurred  she  had  full  knowledge 
that  the  defendant  was  the  owner  of  the  second  mortgage,  and 
leave  was  given  her  by  the  court  to  make  him  a  party  to  the  action, 
and  so  conclude  him  by  the  judgment,  which  she  declined  to  ac- 
cept, but  caused  the  sale  to  proceed,  and  purchased  the  property 
upon  such  terms  that  both  expressly  and  in  legal  effect,  her  pur- 
chase was  subject  to  the  lien  of  the  defendant's  mortgage. 

Under  such  circumstances  no  case  was  made  for  a  resort  to 
this  unusual,  exceptional  and  severe  remedy.  It  is  insisted  that, 
under  the  provisions  of  the  Civil  Code  relating  to  foreclosure  ac- 
tions, such  a  judgment  as  the  one  entered  herein  cannot  be  ren- 
dered in  any  case;  but  it  is  unnecessary  to  determine  that  ques- 
tion upon  this  appeal.  We  may  assume  that,  in  a  proper  case, 
jurisdiction  still  exists  to  relieve  a  purchaser  at  a  foreclosure  sale, 
who  finds  that,  by  reason  of  some  defect  in  the  proceedings,  the 
lien  of  a  subsequent  incumbrance  has  not  been  extinguished;  but 
the  facts  here  shown  are  not  sufficient  to  authorize  the  exercise 
of  that  jurisdiction.  We  think  that  in  such  cases  the  purchaser 
must  show  that  he  purchased  in  good  faith,  relying  upon  the  regu- 
larity and  sufficiency  of  the  foreclosure  proceedings,  and  that  the 
subsequent  lienor  had  knowledge  of  the  sale,  and  permitted  the 
purchaser  to  make  the  purchase,  without  disclosing  the  existence 
of  his  incumbrance,  or  calling  attention  to  the  defect  in  the  pro- 
ceedings. In  2  Jones  on  Mort.,  (§  1540,  p.  421),  it  is  stated  that  a 
strict  foreclosure  is  proper  ''  where  a  mortgagee  or  purchaser  is  in 
possession  under  a  legal  title  from  the  mortgagor,  for  the  purpose 
of  cutting  off  subsequent  liens  or  incumbrances,  as  in  case  one 
has  purchased  in  good  faith  at  a  mortgage  sale,  which  is  not  con- 
clusive against  some  incumbrancer  not  made  a  party  to  the  suit, 
and  the  purchaser  has  gone  into  possession."  The  cases  have 
been  very  rare  in  this  state  where  the  remedy  has  been  invoked, 
but  we  fail  to  find  a  case  where  it  has  been  applied  to  relieve  a 
party  who  buys  with  full  knowledge  of  the  outstanding  incum- 
brance and  subject  to  it. 

The  right  to  a  judicial  sale  of  the  mortgaged  property  to  pay 
the  mortgage  debt,  is  in  this  state  one  of  the  incidents  of  the  mort- 
gage contract;  and  if  the  mortgagor  is  in  default,  the  mortgagee 
is  entitled  to  the  enjoyment  of  this  right  unimpaired.     It  can 


MOULTON    r.    CORNISH  747 

only  be  secured  to  him  by  a  sale,  in  an  action  or  proceeding  to 
which  he  is  a  party;  for  in  all  such  cases  the  sale  is  made  for  the 
benefit  of  all  the  parties  interested,  and  the  proceeds  are  distrib- 
uted among  them,  in  the  order  of  the  priority  of  their  respective 
liens. 

As  to  this  defendant,  the  plaintiff  is  only  a  mortgagee  in  pos- 
session. It  is  true  she  has  also  acquired  the  title  of  the  mortgagor 
and  has  extinguished  the  liens  of  all  other  incumbrancers,  who 
were  made  parties  to  the  foreclosure  action. 

But  she  occupies  no  better  position  with  respect  to  the  defend- 
ant than  if  she  had  taken  a  deed  from  the  mortgagor  and  an  as- 
signment of  the  other  incumbrances  and  had  gone  into  possession. 
As  to  the  defendant,  her  mortgage  is  still  unforeclosed,  and  the 
estate,  which  the  mortgagor  had  when  he  executed  the  defendant's 
mortgage,  is  still  subject  to  its  lien.  The  plaintiff  may  at  any  time 
foreclose  her  mortgage,  as  against  the  defendant,  notwithstanding 
the  former  defective  foreclosure.  {Brainard  v.  Cooper,  10  X.  Y. 
356;  Walsh  v.  Rutgers  Fire  Ins.  Co.,  13  Abb.  Pr.  33;  Frankly n  v. 
Howard,  61  How.  Pr.  43.)  It  imposes  no  hardship  to  require  her 
to  pursue  such  course  if  she  wishes  to  rid  the  title  of  the  lien  of 
defendant's  mortgage.  She  will  be  as  fully  protected  upon  such 
a  foreclosure  as  she  would  have  been  upon  the  original  foreclosure 
had  she  made  him  a  party  to  it. 

The  plaintiff  may  have  the  ordinary  decree  of  foreclosure 
against  the  defendant  in  this  action  if  she  so  desires,  and  all  per- 
sons who  are  necessary  parties  defendant  are  brought  in.  It  is 
not  seen  how  any  relief  can  be  afforded  without  the  presence  of 
the  purchasers  of  the  other  two  parcels  of  the  mortgaged  premises. 
If  it  is  sought  to  re-foreclose  plaintiff's  mortgage,  they  are  unques- 
tionably necessary  parties,  as  the  owners  of  separate  portions  of 
the  property  mortgaged,  and  by  their  purchases  they  have  respec- 
tively acquired  an  interest  in  plaintiff's  mortgage.  If  the  court  is 
asked  to  apportion  either  the  plaintiff's  or  the  defendant's  mortgage 
between  the  three  farms,  they  are  necessary  parties  to  a  deter- 
mination of  that  question.  They  would  not  be  bound  by  any 
judgment  rendered  in  this  action  which  adjudged  the  extent  of 
the  lien  of  either  mortgage  upon  their  respective  properties,  and 
such  adjudication  would  be  necessarily  involved  in  the  ascertain- 
ment of  the  amount  of  either  mortgage  equitably  chargeable  upon 
the  several  parcels.  In  such  a  case  the  objection  of  a  defect  of 
parties  is  available,  although  not  raised  by  demurrer  of  answer. 
The  plaintiff  is  not  entitled  to  the  equitable  relief  sought,  if  it 


748     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

appears  that  a  complete  determination  of  the  controversy  cannot 
be  had  without  the  presence  of  other  parties,  and  the  court  must 
direct  them  to  be  brought  in  (Code,  §  452) ;  and  where  it  appears 
upon  appeal  that  this  has  not  been  done,  the  court  will  reverse 
the  judgment,  although  the  issue  is  not  made  by  the  pleadings. 
(Bear  v.  Ain.  Rapid  Tel.  Co.,  36  Hun,  400.)  If  the  plaintiff  ob- 
tains leave  to  amend  by  bringing  in  all  necessary  parties,  she  may 
have  a  decree  for  a  foreclosure  of  her  mortgage  as  against  the  de- 
fendant, and  a  sale  of  the  mortgaged  premises,  in  which  decree 
the  equities  of  the  different  purchasers,  as  between  themselves, 
can  be  properly  adjusted,  and  the  court  can  direct  the  application 
of  the  net  rents  and  profits  upon  the  mortgage  debt,  in  ascertain- 
ing the  amount  which  the  plaintiff  and  her  co-owners  of  the  mort- 
gage are  entitled  to  receive  upon  a  sale  of  the  property.  In  general 
terms,  we  think  this  is  the  extent  of  the  relief  to  which  she  is  en- 
titled under  the  pleadings  and  proofs  in  this  action. 

The  judgment  must,  therefore,  be  reversed,  and  a  new  trial 
granted  if  plaintiff  elects  within  sixty  days  after  filing  the  remit- 
titur in  the  court  below  to  proceed  with  the  action,  and  applies  for 
leave  to  amend  by  bringing  in  the  necessary  parties.  If  such 
leave  is  not  applied  for  or  granted  the  complaint  is  dismissed,  with 
costs  in  this  court  and  in  all  courts;  if  leave  to  amend  is  granted, 
costs  in  this  court  to  abide  the  determination  of  the  Supreme  Court 
as  to  the  conditions  upon  which  leave  to  amend  may  be  granted. 

All  concur. 


RYAN  V.  HOLLIDAY 

Supreme  Court  of  California,  1895 

(110  Ta/.  335) 

Van  Fleet,  J.  The  judgment  in  this  case  must  be  reversed  for 
want  of  any  averment  that  the  note  secured  by  the  mortgage 
sought  to  be  foreclosed  has  not  been  paid.  The  only  allegation  in 
this  regard  is: 

"That  the  interest  on  said  note  and  mortgage  has  been  paid  in 
full  up  to  the  eleventh  day  of  September,  1894,  and  there  is  now 
due  and  owing  to  the  plaintiff  the  sum  of  twelve  hundred  dollars 
($1,200),  with  interest  thereon  at  the  rate  of  twelve  per  cent  per 
annum  from  the  eleventh  day  of  September,  1894." 


RYAN    V.    HOLLIDAY  749 

This  is  not  the  equivalent  of  an  averment  of  non-payment. 
The  language,  ''There  is  now  due,"  etc.,  is  but  a  conclusion  of  law 
and  not  the  averment  of  a  fact.  The  breach  of  the  contract  to  pay 
is  of  the  essence  of  the  cause  of  action  and  must  be  alleged.  (Frisch 
V.  Caler,  21  Cal.  71;  Scroufe  v.  Clay,  71  Cal.  123;  Roberts  v.  Tread- 
well,  50  Cal.  521;  Barney  v.  Vigoreaux,  92  Cal.  (331.)  The  fact 
that  no  demurrer  was  interposed  and  that  judgment  went  by 
default  makes  no  essential  difference,  since  the  defect  goes  to  the 
statement  of  a  cause  of  action  {Barney  v.  Vigoreaux,  supra):  and 
that  defect  is  not  waived  by  a  failure  to  demur.  (Code  Civ.  Proc, 
sec.  434.) 

While  we  are  reluctant,  as  suggested  in  Notman  v.  Green,  90 
Cal.  173,  to  reverse  a  judgment  upon  such  a  technicality,  and 
especially  in  favor  of  a  defendant  who  has  apparently  stood  by  and 
permitted  the  court  below  to  overlook  an  error,  susceptible  of  easy 
correction,  and  then  takes  advantage  of  such  error  on  appeal;  and 
while  we  would  avoid  the  necessity,  if  possible,  on  the  other  hand, 
that  consideration  is  largely  neutralized  by  the  further  one,  that  a 
party  guilty  of  such  an  inexcusable  breach  of  good  pleading  as  is 
here  exhibited  is  not  entitled  to  have  it  lightly  condoned,  but 
should  suffer  the  consequences. 

The  objection  that  the  complaint  should  have  averred  either  a 
presentation  of  a  claim  against  the  estate  of  appellant's  intestate, 
or  an  express  waiver  of  any  recourse  against  the  general  estate,  is 
not  well  taken.  Section  1500  of  the  Code  of  Civil  Procedure  has 
no  application  to  the  facts  of  this  case.  The  note  and  mortgage 
sued  on  were  not  in  any  sense  a  claim  against  the  estate  of  said 
intestate.  The  latter  was  not  the  maker  of  the  note  or  mortgage, 
nor  did  a  demand  of  any  character  exist  thereunder  against  the 
estate.  The  representative  was  made  a  party  defendant  solely 
by  reason  of  the  fact  that  subsequently  to  the  making  of  the 
mortgage  in  suit  the  mortgaged  land  was  purchased  by  said  in- 
testate in  his  lifetime,  and  the  title  thereto  rested  in  his  estate  at  his 
death,  subject  to  the  mortgage  lien.  It  was  necessary  to  make  his 
representative  a  party  only  for  the  purpose  of  foreclosing  the  rights 
of  the  estate  in  the  land  and  for  that  purpose  alone.  The  estate  of 
said  intestate  was  in  no  way  holden  for  any  deficiency  that  might 
arise  out  of  sale  of  the  property,  nor  was  any  such  relief  asked  or 
taken.  There  was,  therefore,  no  claim  to  be  presented  against 
said  estate.  The  section  referred  to  applies  only  to  instances 
where  the  note  and  mortgage  constitute  a  claim  against  the  estate 
of  the  deceased. 


750     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

The  judgment  is  reversed  and  the  cause  remanded  with  cHrec- 
tions  to  the  court  below  to  permit  plaintiff  to  amend  his  complaint. 
Harrison,  J.,  and  Garoutte,  J.,  concurred. 


TRENOR  V.  LE  COUNT 

Supreme  Court  of  New  York,  General  Term,  Second 
Department,  1895 

(84  Hun,  426) 

Appeal  by  the  plaintiff,  John  H.  Trenor,  as  trustee  for  Minnie 
J.  Rice,  from  an  order  of  the  Supreme  Court,  made  at  the  West-. 
Chester  Special  Term  and  entered  in  the  office  of  the  clerk  of  the 
county  of  Westchester  on  the  27th  day  of  October,  1894,  directing 
the  discontinuance  of  the  action  and  the  cancellation  of  the  Us 
pendens  upon  the  payment  to  the  plaintiff  of  the  amount  due  him 
for  interest  upon  the  mortgage  mentioned  in  the  complaint,  and 
the  costs  of  the  action  to  the  time  of  the  order. 

CuLLEN,  J.  This  action  is  brought  to  foreclose  a  mortgage 
which  contained  the  usual  thirty  days'  interest  clause.  Default 
having  been  made  in  the  payment  of  the  interest  for  more  than 
thirty  days  the  plaintiff  elected  that  the  principal  should  become 
due  and  instituted  this  foreclosure.  The  defendants,  on  affidavits 
charging  the  plaintiff's  attorney  with  unfriendly  feeling  towards 
the  defendants  and  a  desire  on  his  part  to  harass  them,  applied  for 
an  order  staying  the  action.  On  that  application  the  court  made 
an  order  directing  the  action  to  be  discontinued  upon  defendants 
paying  to  the  plaintiff  the  interest  in  default  and  the  costs  of  the 
action  to  the  time  of  the  order.  From  that  order  the  plaintiff 
appeals. 

We  think  the  order  was  erroneous.  There  was  no  charge  of 
fraud  or  collusion  upon  the  part  of  the  plaintiff  or  his  attorney  by 
which  the  defendant  was  prevented  from  paying  the  interest  or 
misled  in  that  respect.  In  the  absence  of  conduct  of  that  char- 
acter the  motives  of  the  plaintiff  or  his  attorney  in  foreclosing  the 
mortgage  are  immaterial.  The  plaintiff  is  simply  enforcing  his 
legal  right.  The  defendant  Fannie  A.  Le  Count  asserts  in  her 
affidavit  that  after  the  default  the  plaintiff  promised  to  receive 
the  interest  from  her  if  paid  by  a  specified  time.  This  promise 
the  plaintiff  denies.    The  agreement  would  seem  invalid  as  without 


SUMMERS   V.    BROMLEY  751 

consideration,  but  whether  vahd  or  not  its  force  and  effect  could 
only  be  determined  by  a  proper  plea  in  that  respect  and  the  trial 
of  the  issue  raised  by  the  plea.  {Bennett  v.  Stevenson,  53  N.  Y. 
508.) 

The  order  appealed  from  should  be  reversed  and  motion  denied, 
with  ten  dollars  costs  and  disbursements. 

Pratt,  J.,  concurred;  Dykman,  J.,  not  sitting. 

Order  reversed,  with  ten  dollars  costs  and  disbursements. 


SUMMERS  V.  BROMLEY 

Supreme  Court  of  Michigan,  1873 

(28  Mich.  125) 

Graves,  J.  This  was  an  ordinary  foreclosure  cause  on  a  mort- 
gage made  by  defendant,  Barton  M.  Bromley,  to  complainant's 
assignor,  and  dated  March  9th,  1868.  The  only  statement  in  the 
liill  connecting  the  other  defendants  with  the  subject  of  the  suit, 
or  in  any  way  implicating  them,  is  one  made  under  general  rule 
ninety-one  of  the  rules  in  chancery,  and  is  in  these  terms:  "And 
your  orator  further  shows  unto  this  court  that  Joseph  Emerson, 
William  Burbank,  Jefferson  Jones,  John  Barr,  and  Olive  Bromley, 
have  or  claim  some  interest  in  the  said  mortgaged  premises,  or  in 
some  part  thereof,  as  purchasers,  mortgagees  or  otherwise,  which 
interests,  if  any,  have  accrued  subsequent  to  the  lien  of  the  said 
mortgage,  and  are  subject  thereto."  None  of  the  defendants, 
except  two  of  those  brought  in  under  this  particular  allegation, 
namely,  Emerson,  and  Olive  Bromley,  made  defense.  The}-  put 
in  separate  answers,  but  their  answers  exhibited  the  same  ground 
of  defense,  and  it  was,  that  when  the  mortgage  was  given  the 
defendant  Olive  was  the  absolute  and  exclusive  owner  of  the 
premises,  and  that  the  defendant  Emerson  succeeded  to  her  abso- 
lute and  exclusive  title,  by  conveyance  from  her.  It  is  true  that 
the  validity  of  this  position  was  made  to  depend  upon  the  genuine- 
ness of  an  instrument  antedating  the  mortgage,  and  which  was 
placed  on  record  and  purported  to  be  a  deed  of  the  premises  from 
the  defendant  Olive  Bromley,  to  the  mortgagor  Barton  M.  Brom- 
ley. But  the  question  of  forgery  connected  with  the  alleged  deed 
was  merely  something  involved  in  the  defense,  and  needed  to  main- 
tain it.  It  was  not  the  fundamental  defense  itself.  The  ultimate 
and  substantial  question  was,  in  whom  did  the  title  reside.     On 


752     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

the  face  of  the  papers  it  purported  to  reside  in  the  mortgagor, 
Barton  M.  Bromley.  The  defense  insisted  that  when  the  mort- 
gage was  given,  it  resided  in  OHve  Bromley,  who  transferred  to 
Emerson,  in  whom  it  had  since  continued  to  reside,  and  therefore 
that  neither  the  mortgagor  nor  mortgagee  possessed  any  title. 
The  very  gist  of  the  defense  was,  the  assertion  of  a  title  both  hos- 
tile and  paramount  to  that  claimed  for  the  mortgagor  and  mort- 
gagee. On  this  the  controversy  was  made  to  hinge.  The  com- 
plainant filed  the  usual  general  replication,  and  the  parties  went  at 
great  length  into  proofs  upon  this  disputed  question  of  title,  and 
the  court  below  deci'eed  foreclosure  and  sale  in  the  ordinary  form, 
and  in  terms  provided  for  barring  defendants,  and  for  giving  pos- 
session to  the  purchaser.  The  defendant  Emerson,  who  claimed 
under  Olive  as  owner  of  the  adverse  and  superior  title,  alone 
appealed. 

This  case  has  been  argued  with  great  fullness  and  ability,  and 
it  is  much  to  be  regretted  that  the  litigation  cannot  be  now  closed. 
But  that  is  impossible.  The  circumstances  of  the  case,  and  the 
settled  rules  of  law,  are  so  plainly  opposed  to  such  a  result  as  to 
preclude  all  doubt.  The  difficulty  is  at  least  twofold,  and  it  is 
fundamental  as  well  as  formal.  The  real  question  was  strictly 
legal,  and  one  proper  for  a  court  of  law.  Welby  v.  Duke  of  Rut- 
land, 6  Bro.  Par.  Cas.,  575;  Hipp  v.  Bahin,  19  How.  271. 

In  the  first  place,  it  is  not  competent  in  a  foreclosure  suit,  what- 
ever the  pleadings,  to  proceed  to  litigate  and  settle  the  right  of  a 
party  who  sets  up  a  legal  title  which,  if  valid,  is  adverse  and  para- 
mount to  the  title  of  both  mortgagor  and  mortgagee.  Chamber- 
lain V.  Lyell,  3  Mich.  448;  Wurcherer  v.  Hewitt,  10  Mich.  453; 
Banks  v.  Walker,  3  Barb.  Ch.  438;  Eagle  Fire  Co.  v.  Lent,  6  Paige, 
637;  Holcomb  v.  Holcomb,  2  Barb.  S.  C,  20;  Corning  v.  Smith,  2 
Seld.  82;  Lewis  v.  Smith,  11  Barb.  152,  S.  C,  5  Seld.  502.  Our 
legislation  respecting  foreclosure  proceedings  does  not  countenance 
such  litigation.  The  passage  in  the  statute  {Comp.  L.,  §  5154), 
which  declares  that  the  commissioner's  deed  shall  be  an  entire  bar 
against  each  of  the  parties,  must  be  construed  with  the  preceding 
and  other  members  of  the  section  so  as  to  harmonize  therewith 
and  with  the  general  spirit  of  the  law.  It  cannot  rightly  be  held 
to  mean  that  in  case  neither  the  mortgagor  or  mortgagee  had  any 
title,  the  commissioner's  deed  shall  have  the  effect  to  give  the 
purchaser  one,  by  barring  the  true  owner.  A  court  of  equity  is  not 
the  appropriate  tribunal,  nor  is  a  foreclosure  suit  a  suitable  pro- 
ceeding, for  the  trial  of  claims  to  the  legal  title  which  are  hostile 


SUMMERS    l\    BROMLEY  753 

;uul  jjaraniouut  to  the  interests  and  rights  and  titles  of  both  mort- 
gagor and  mortgagee.  Such  a  trial  will  neither  fall  in  with  the 
nature  of  the  jurisdiction,  or  the  genius  or  frame  of  the  particular 
remedy. 

But,  second,  if  it  were  possible  to  regularly  investigate  such  a 
question,  and  from  the  record  aptly  made  up  in  a  foreclosure 
case,  work  out  a  decree  directed  to  the  adjudication  of  the 
i:)oint  upon  the  title,  the  present  bill  is  not  so  framed  as  to 
admit  of  it. 

No  issue  is  made  by  the  pleadings  upon  this  question  of  supe- 
riority of  title,  or  even  upon  the  subordinate  and  subsidiary  con- 
troversy respecting  the  forgery  of  the  deed.  The  bill  affords  no 
basis  for  any  such  issue.  That  proceeds  agreeably  to  the  rule  of 
the  court,  and  merely  charges  the  defendants,  Emerson  and  Olive 
Bromley,  as  persons  claiming  subordinate  rights  and  interests. 
There  is,  then,  no  foundation  in  the  bill  for  any  decree  upon  the 
question  of  title.  See  the  cases  last  cited,  also  Warner  v.  Whit- 
taker,  6  Mich.  133;  Wright  v.  Dudley,  8  Mich.  115;  Barrows  v. 
Baughman,  9  Mich.  213;  Moran  v.  Palmer,  13  Mich.  367. 

It  was  not  competent  for  the  court  below,  and  it  is  not  competent 
for  this  court,  to  decree  upon  and  bind  the  right  set  up  by  Emer- 
son, and  no  writ  of  assistance  could  be  rightly  awarded  to  turn 
him  out  of  possession.  The  purchaser  must  be  left  to  try  the  hostile 
title  set  up  by  Mrs.  Bromley  and  Emerson,  in  ejectment,  where  a 
jury  may  pass  upon  the  question  raised  by  the  charge  of  forgery. 
That  question  is  a  very  proper  one  to  be  submitted  to  such  a  tri- 
bunal, while  it  is  correctly  considered  as  extremely  unfit  for  a  court 
of  equity,  unless  the  case  is  found  to  be  a  plain  one.  Barnesly  v. 
Poivel,  1  Ves.  Sr.  120. 

The  decree  appears  to  be  well  enough  as  against  the  mortgagor, 
Barton  M.  Bromley,  but  it  must  be  modified  so  far  as  to  save  it 
from  operating  against  the  adverse  paramount  right  and  title  set 
up  by  Emerson  and  Olive  Bromley,  and  so  as  to  exclude  any 
right  to  a  writ  of  assistance,  except  as  against  Barton  M.  Brom- 
ley and  the  parties,  if  any,  holding  under  him  subsequent  to  the 
mortgage. 

It  would  seem  that  both  sides  have  been  somewhat  at  fault  in 
their  proceeding  to  carry  on  an  inadmissible  controversy.  It  does 
not  appear  that  any  objection  was  raised  anywhere  to  the  irregu- 
larity. On  the  contrary,  all  seem  to  have  accepted  the  conflict 
willingly.  The  point  should  have  been  raised  below,  and  in  season. 
If  it  had  been,  it  is  to  be  presumed  that  the  court  below  would 


754     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

have  dealt  with  it  correctly.  I  am  therefore  inclined  to  think  that 
neither  party  ought  to  recover  costs  as  against  the  other. 

The  cause  should  be  remitted  to  the  court  below  to  carry  out 
the  decree  as  modified. 

CooLEY  and  Campbell,  JJ.,  concurred.^ 

Christiancy,  Ch.  J.  I  concur  in  the  result,  upon  the  ground 
that  the  title  could  not  be  litigated  under  this  bill.  I  express  no 
opinion  whether  it  could  properly  have  been  contested  under 
pleadings  which  should  distinctly  put  the  question  of  title  in 
issue. 

NUTT  V.   CUMING 

Court  of  Appeals  of  New  York,  1898 

(155  N.  Y.  309) 

Haight,  J.  On  the  9th  day  of  August,  1882,  the  defendant 
Cuming  recovered  a  judgment  against  one  Thomas  Kerrigan,  which 
became  a  lien  upon  real  estate  subject  to  the  lien  of  a  mortgage 
theretofore  executed,  bearing  date  the  14th  day  of  January,  1882. 
On  the  1st  day  of  October,  1891,  an  action  was  brought  to  fore- 
close the  mortgage,  which  resulted  in  the  entering  of  the  usual 
judgment  of  foreclosure  and  sale  on  the  13th  day  of  January, 
1892.  The  sale  of  the  property  under  the  judgment  did  not,  how- 
ever, take  place  until  December,  1896,  and  after  the  expiration  of 
ten  years  from  the  entry  of  the  Cuming  judgment.  The  special 
Term  held  that  Cuming  was  entitled  to  have  his  judgment  paid 
out  of  the  surplus  moneys  arising  on  the  sale.  The  Appellate 
Division  reversed  this  part  of  the  order,  holding  that  the  lien  of  the 
judgment  had  ceased  to  exist  before  the  sale  took  place  under  the 
foreclosure  judgment,  and  that,  therefore,  no  lien  in  favor  of  Cum- 
ing was  transferred  to  the  surplus  moneys. 

It  is  now  claimed  that  the  foreclosure  judgment  having  been 
entered  before  the  expiration  of  the  ten  years  from  the  entry  of 
the  Cuming's  judgment  the  lien  was,  by  operation  of  law,  trans- 
ferred to  the  surplus  moneys  that  should  arise  upon  the  sale  of 
the  premises  as  of  the  day  of  the  entry  of  the  foreclosure  judgment, 
and  that  from  that  time  he  was  barred  and  foreclosed  of  all  right, 
title,  interest  or  equity  of  redemption  in  the  mortgaged  premises. 
We  do  not  so  understand  the  law.  The  judgment  of  foreclosure 
first  determined  the  amount  due  upon  the  mortgage.     It  then 

^Accord,  McCamman  v.  Davis,  162  Mich.  435,  438  (1910). 


NUTT   v.    CUMING  755 

provided  for  a  sale  of  the  premises  at  public  auction  by  a  referee 
appointed  for  that  purpose,  who  was  directed  to  execute  and  de- 
liver to  the  purchaser  a  deed,  and  out  of  the  moneys  arising  from 
the  sale  to  pay  the  fees,  expenses,  taxes  and  allowance  to  attoi- 
neys,  and  then  the  amount  due  upon  the  mortgage.  The  surplus 
arising  from  the  sale  it  required  to  be  paid  over  to  the  chamber- 
lain of  the  city  of  New  York,  subject  to  the  further  order  of  the 
court.  It  then  adjudged  "that  the  defendants  and  all  persons 
claiming  under  them,  or  any,  or  either  of  them,  after  the  filing  of- 
such  notice  of  pendency  of  this  action,  be  forever  barred  and  fore- 
closed of  all  right,  title,  interest  and  equity  of  redemption  in  the 
said  mortgaged  premises  so  sold  or  any  part  thereof."  It  will 
thus  be  observed  that  under  the  provisions  of  the  judgment  the 
right,  title  and  interests  of  the  defendants  became  barred  and  fore- 
closed, not  upon  the  date  of  the  entry  of  the  judgment,  but  from 
and  after  the  sale  of  the  premises  and  the  conveyance  made  there- 
under. 

The  Code,  after  specifying  the  various  steps  necessary  to  be  taken 
in  the  foreclosure  of  a  mortgage,  provides  that  ''A  conveyance  upon 
a  sale,  made  pursuant  to  a  final  judgment,  in  an  action  to  foreclose 
a  mortgage  upon  real  property,  ...  is  as  valid,  as  if  it  was  exe- 
cuted by  the  mortgagor  and  mortgagee,  and  is  an  entire  bar  against 
each  of  them,  and  against  each  party  to  the  action  who  was  duly 
summoned,  and  every  person  claiming  from,  through,  or  under  a 
party,  by  title  accruing  after  the  filing  of  the  notice  of  pendency 
of  the  action."  (§  1632.)  Here  the  legislature  gives  to  the  convey- 
ance the  same  force  and  effect  that  is  given  by  the  judgment.  One 
is  in  harmony  with  the  other. 

Rule  64  of  the  General  Rules  of  Practice  provides  that  "On 
filing  the  report  of  the  sale  any  party  to  the  suit,  or  any  person  who 
had  a  lien  on  the  mortgaged  premises  at  the  time  of  the  sale,  upon 
filing  with  the  clerk  where  the  report  of  sale  is  filed  a  notice,  stating 
that  he  is  entitled  to  such  surplus  mone^^s  or  some  part  thereof,  and 
the  nature  and  extent  of  his  claim,  may  have  an  order  of  reference," 
etc.  It  is  the  lien  existing  at  the  time  of  the  sale  that  is  transferred 
to  the  surplus  moneys  arising  therefrom.  If,  at  that  time,  no  lien 
exists,  there  is  nothing  which  can  be  transferred  to  the  fund.  Judg- 
ments over  ten  years  old  cease  to  be  liens  upon  real  estate,  and, 
consequentl}^,  are  not  payable  out  of  the  surplus.  (Floyd  v.  Clark, 
16  Daly,  528;  Fliess  v.  Buckley,  90  N.  Y.  286;  I.  &  T.  Nat.  Bank  v. 
Quackenbiish,  143  N.  Y.  .567;  Tufts  v.  Tufts,  18  Wend.  621;  Graff 
V.  Kips,  1  Edwards  Ch.  619;  Roe  v.  Swart,  5  Cowen,  294.) 


756     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

A  mortgage  upon  real  property  may  be  foreclosed  and  the  lands 
sold  under  the  statute  without  an  action.  An  action  may  be 
maintained  to  bar  and  foreclose  all  persons  claiming  an  interest 
in  or  an  equity  of  redemption,  and  for  a  sale  of  the  lands  for  the 
purpose  of  paj'ing  the  indebtedness  due  upon  the  mortgage.  The 
chief  object  is  the  collection  of  the  indebtedness,  which  can  be 
effected  only  by  a  sale.  A  judgment  entered  in  a  foreclosure  action 
is  final  for  all  purposes  of  review,  but  in  other  respects  it  is  inter- 
locutorj'.  All  of  the  proceedings  for  the  sale,  including  the  adver- 
tising of  the  notice  and  the  confirmation  of  the  sale,  take  place 
thereafter.  The  provision  barring  others  of  their  interest  in,  or 
of  their  rights  of  equity  of  redemption  in  the  mortgaged  premises, 
of  necessity  relates  to  the  final  concluding  act,  that  of  a  sale  of  the 
premises.  Until  that  time  the  mortgagee  or  the  owner  of  the 
equity  of  redemption  may  redeem,  and  persons  having  judgment 
liens  thereon  may  sell  upon  execution,  notwithstanding  the  judg- 
ment, but,  as  soon  as  the  sale  is  made,  confirmed,  and  conveyance 
delivered,  that  provision  of  the  judgment  becomes  operative  and 
of  full  force,  and  the  parties  to  the  action  are  forever  thereafter 
barred  and  foreclosed  of  all  of  their  right,  title,  interest  and  equity 
of  redemption. 

The  other  questions  involved  were  properly  disposed  of  by  the 
Appellate  Division. 

Parker,  Ch.  J.,  Martin  and  Vann,  JJ.,  concur;  O'Brien,  J., 
reads  for  reversal,^  and  Bartlett,  J.,  concurs;  Gray,  J.,  absent. 

Order  affirmed,  with  costs. 


WEINSTEIN  V.  STNEL 

Supreme  Court  of  New  York,  Appellate  Division,  Second 
Department,  1909 

(133  App.  Div.  441) 

Appeal  by  the  defendants,  Solomon  Frank  and  another,  from 
a  judgment  of  the  Supreme  Court  in  favor  of  the  plaintiff,  entered 
in  the  office  of  the  clerk  of  the  county  of  Kings  on  the  Uth  day  of 
January,  1909,  upon  the  decision  of  the  court  rendered  after  a 
trial  at  the  Kings  County  Special  Term. 

^  The  dissenting  opinion  is  omitted. 


WEINSTEIN   V.    8INEL  <0/ 

Judgment  affirmed,  with  costs,  on  the  opinion  of  Mr.  .Justice 
Carr  at  Special  Term. 

HiRSCHBERG,  P.  J.,  WooDWARD,  BuRR  and  RiCH,  J.J.,  Concurred. 

The  followinji,  is  the  opinion  delivered  at  Special  Term : 

(^ARR,  J.  This  is  an  action  to  foreclose  a  second  mortgage.  All 
the  parties  defendant  are  in  default  except  the  defendants  Frank 
and  Danowitz,  who  were  made  parties  because  they  had  guaran- 
teed the  payment  of  the  mortgage  debt.  They  are  proper  parties 
defendant  in  this  i  '.ion.  (Robert  v.  Kidanshj,  111  App.  Div.  475.) 
These  defendants  resist  judgment  on  the  ground  that  the  bond 
and  mortgage  were  not  due  at  the  beginning  of  the  action.  The 
period  of  maturity  provided  by  the  bond  and  mortgage  is  August  1, 
1911.  The  plaintiff  sues  upon  the  claim  that  by  reason  of  a  de- 
fault on  the  part  of  the  owners  of  the  property  in  paying  the  in- 
terest on  a  prior  or  first  mortgage  he  had  the  right  to  and  did  elect 
that  the  second  mortgage  should  become  immediately  due  and 
payable.  The  important  question  in  the  case  arises  upon  the  con- 
struction to  be  given  to  a  clause  in  the  second  mortgage  which  is 
said  to  give  such  right  of  election.  This  question  is  to  be  deter- 
mined according  to  the  manifest  intention  of  the  parties  as  shown 
by  writing. 

The  parties  to  the  second  mortgage  used  a  printed  form,  such 
as  law  stationers  sell,  and  which  are  in  common  use  by  the  legal 
profession.  This  form  contained  a  clause  marked  "Seventh" 
which  provided  as  follows:  "Seventh:  And  the  said  moitgagor 
does  further  covenant  and  agree  that  in  default  of  the  payment 
of  all  taxes,  charges  and  assessments  which  may  be  imposed  by 
law  upon  the  said  mortgaged  premises  or  any  part  thereof,  that 
it  shall  and  may  be  lawful  for  the  said  mortgagee,  without  notice 
to  or  demand  from  the  mortgagor,  to  pay  the  amount  of  any  such 
tax,  charge  or  assessment  with  any  expenses  attending  the  same, 
and  any  amount  so  paid  the  said  mortgagor  covenants  and  agrees 
to  repay  to  the  said  mortgagee,  with  interest  thereon,  without 
notice  or  demand,  and  the  same  shall  be  a  lien  on  the  said  premises 
and  he  secured  by  the  said  bond  and  by  these  presents;  and  the 
whole  amount  hereby  secured,  if  not  then  due,  shall  thereupon  if 
the  said  mortgagee  so  elect  become  due  and  payable  forthwith." 

As  there  was  a  prior  mortgage  on  the  premises,  specifically 
referred  to  in  this  instrument  in  question,  the  draftsman  of  the 
second  mortgage  inserted  in  the  "Seventh"  clause  of  the  printed 
form  the  words  "interest  on  prior  mortgage,"  so  that  the  clause 
read:  "And  the  said  mortgagor  does  further  covenant  and  agree 


758     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

that  in  default  of  the  payment  of  all  taxes,  interest  on  prior  mort- 
gage, charges  and  assessments  which  may  he  imposed  by  law  upon 
the  said  mortgaged  premises  or  any  part  thereof,  that  it  shall  and 
may  be  lawful  for  the  said  mortgagee,  without  notice  to  or  demand 
from  the  mortgagor,  to  pay  the  amount  of  any  such  tax,  charge 
or  assessment,"  etc. 

The  draftsman,  however,  neglected  to  reinsert  the  words  "in- 
terest on  prior  mortgage''  in  subsequent  lines  of  the  mortgage, 
where  the  words  "tax,  charge  or  assessment"  appear.  As  a  result 
of  this  omission  the  defendants  contend  that  the  final  provision 
of  the  clause,  "and  the  whole  amount  hereby  secured,  if  not  then 
due,  shall  thereupon,  if  the  said  mortgagee  so  elect,  become  due 
and  payable  forthwith,"  does  not  apply  to  a  case  where  there  has 
been  a  default  in  the  payment  of  interest  on  prior  mortgage.  A 
default  did  occur  in  the  payment  of  interest  on  prior  mortgage, 
and  the  plaintiff,  to  protect  his  security,  paid  some  SI, 400  as  ac- 
crued interest  on  the  first  or  prior  mortgage.  This  first  mortgage 
was  in  the  sum  of  $52,500,  on  which  interest  was  payable  half 
yearly  in  amounts  of  $1,443.75. 

If  the  defendants'  contention  as  to  the  effect  of  the  clause  in 
the  second  mortgage  is  correct,  then  the  mortgagors  were  in  a 
position  that  they  could  stand  by  and  compel  their  mortgagee  to 
pay  the  interest  on  the  first  mortgage  every  time  it  accrued  in 
order  to  protect  his  security  of  the  second  mortgage  without  hav- 
ing any  remedy  against  them  except  by  subrogation  at  the  fixed 
maturity  of  the  mortgage.  This  result  will  be  so  extraordinary  as 
to  require  the  plainest  evidence  that  the  parties  so  contracted. 

It  seems  to  me,  on  the  contrary,  that  the  parties  to  the  second 
mortgage  never  so  intended.  The  "Seventh"  clause  in  the  second 
mortgage,  which  is  the  one  in  suit,  gives  the  mortgagee  the  right 
to  pay  the  interest  on  the  first  mortgage  whenever  it  becomes  due, 
and  the  last  provision  of  that  clause  related  back  to  a  default  in 
the  payment  of  the  "interest  on  prior  mortgage,"  as  well  as  to  a 
default  in  the  payment  of  "all  taxes,"  etc.  The  word  "all"  here 
is  used  in  the  sense  of  "any,"  as  is  shown  by  the  latter  use  in  the 
same  clause  of  the  words,  "anj-  such  tax,  charge  or  assessment." 

The  defendants  further  contend  that  inasmuch  as  the  plaintiff 
began  this  action  four  days  after  he  paid  the  interest  on  the  first 
mortgage  this  court  should  deny  him  relief  on  the  ground  that 
his  election  to  treat  his  mortgage  as  immediatel}^  due  and  paj^able 
is  inequitable  and  oppressive  on  defendants.  They  urge  the  de- 
cision in  Germania  Life  his.  Co.  v.  Potter,  (124  App.  Div.  814),, 


NEW    YORK    CODE    CIVIL    PROCEDURE  759 

as  sanctioning  a  dismissal  of  the  plaintiff's  complaint  on  this 
ground.  That  case  must  be  confined  to  its  precise  facts  where 
the  court  held  that  the  plaintiff's  course  of  dealing  with  the  de- 
fendant misled  the  defendant.  Without  such  a  finding  that  deci- 
sion would  be  in  flat  opposition  with  a  long  line  of  authorities 
which  settled  the  law  on  this  point  for  several  generations.  (Smith 
V.  Lamb,  59  Misc.  Rep.  568.) 

I  find  no  satisfactory  evidence  in  this  case  that  the  plaintiff  in 
any  way  misled  the  defendants.  Judgment  is  directed  for  the 
plaintiff  against  all  the  defendants  for  a  foreclosure  of  the  mort- 
gage in  suit.  Provision  is  to  be  made  in  the  findings  and  judgment 
defining  the  contingent  liability  of  these  two  defendants  as  guaran- 
tors to  the  amount  stated  in  their  written  guaranty. 


New  York  Code  Civ.  Proc,  §  1626.  Final  judgment;  what  to 
contain.  In  an  action  to  foreclose  a  mortgage  upon  real  property, 
if  the  plaintiff  becomes  entitled  to  final  judgment,  it  must  direct 
the  sale  of  the  property  mortgaged,  or  of  such  part  thereof  as  is 
sufficient  to  discharge  the  mortgage  debt,  the  expenses  of  the 
sale,  and  the  costs  of  the  action. 

§  1627.  Person  liable  for  mortgage  debt  may  be  made  defendant, 
etc.  1.  Any  person  who  is  lial)le  to  the  plaintiff  for  the  payment 
of  the  debt  secured  by  the  mortgage  may  be  made  a  defendant 
in  the  action  and  if  he  has  appeared  or  has  been  personalh'  served 
with  the  summons,  the  final  judgment  may  award  pa^mient  by 
him  of  the  residue  of  the  debt  remaining  unsatisfied,  after  a  sale 
of  the  mortgaged  property,  and  the  application  of  the  proceeds, 
pursuant  to  the  directions  contained  therein.  .  .  . 

§  IQSl.  Notice  of  pendency  of  action  to  be  filed.  The  plaintiff 
must,  at  least  twent}^  days  before  a  final  judgment  directing  a  sale 
is  rendered,  file,  in  the  clerk's  office  of  each  coimty  where  the  mort- 
gaged property  is  situated,  a  notice  of  the  pendency  of  the  action, 
as  prescribed  in  section  1670  of  this  act;  which  must  specify  in 
addition  to  particulars  required  by  that  section,  the  date  of  the 
mortgage,  the.  parties  thereto,  and  the  time  and  place  of  record- 
ing it. 

§  1632.  Effect  of  conveyance  upon  sale.  A  conveyance  upon 
a  sale,  made  pursuant  to  a  final  judgment,  in  an  action  to  foreclose 
a  mortgage  upon  real  property,  vests  in  the  purchaser  the  same 
estate,  only,  that  would  have  vested  in  the  mortgagee,  if  the 
equity  of  redemption  had  been  foreclosed.    Such  a  conveyance  is 


760     ENFORCEMENT  OF  THE  MORTGAGE  BY  MORTGAGEE 

as  valid,  as  if  it  was  executed  by  the  mortgagor  and  mortgagee, 
and  is  an  entire  bar  against  each  of  them,  and  against  every  per- 
son claiming  from,  through  or  under  a  party,  by  title  accruing 
after  the  filing  of  the  notice  of  the  pendency  of  the  action,  as  pre- 
scribed in  the  last  section. 

§  1636.  When  part  only  of  the  property  to  be  soI(i.  Where  the 
mortgage  debt  is  not  all  due,  and  the  mortgaged  property  is  so 
circumstanced,  that  it  can  be  sold  in  parcels  without  injury  to 
the  interests  of  the  parties,  the  final  judgment  must  direct,  that 
no  more  of  the  property  be  sold,  in  the  first  place,  than  is  sufficient 
to  satisfy  the  sum  then  due,  with  the  costs  of  the  action  and  ex- 
penses of  the  sale ;  and  that  upon  a  subsequent  default  in  the  pay- 
ment of  principal  or  interest,  the  plaintiff  may  apply  for  an  order, 
directing  the  sale  of  the  residue,  or  of  so  much  thereof  as  is  neces- 
sary to  satisfy  the  amount  then  due,  with  the  costs  of  the  applica- 
tion and  the  expenses  of  the  sale.  The  plaintiff  may  apply  for 
rnd  obtain  such  an  order,  as  often  as  a  default  happens. 

§  1637.  When  the  whole  property  may  be  sold.  If,  in  a  case 
specified  in  the  last  three  sections,  it  appears  that  the  mortgaged 
property  is  so  circumstanced,  that  a  sale  of  the  whole  will  be  most 
beneficial  to  the  parties,  the  final  judgment  must  direct,  that  the 
whole  property  be  sold ;  that  the  proceeds  of  the  sale,  after  deduct- 
ing the  costs  of  the  action  and  the  expenses  of  the  sale,  be  either 
applied  to  the  satisfaction  of  the  whole  sum  secured  by  the  mort- 
gage, with  such  a  rebate  of  interest,  as  justice  requires;  or  be  first 
applied  to  the  payment  of  the  sum  due,  and  the  balance,  or  so 
much  thereof  as  is  necessary,  be  invested  at  interest,  for  the  benefit 
of  the  plaintiff,  to  be  paid  to  him  from  time  to  time,  as  any  part 
of  the  principal  or  interest  becomes  due. 


FORMS 

The  following  short  form  of  instrument  for  mortgage  of  real 
property  is  lawful  in  New  York  (Real  Property  Law,  sec.  258),  but 
the  use  of  other  forms  is  not  prevented  or  invalidated : 

MORTGAGE 

This  indenture,  made  the  day  of  in  the  year  nineteen 
hundred  and        ,  between  ,  of  ,  party 

of  the  first  part,  and  ,  of  ,  party  of  the 

second  part. 

Whereas,  the  said  is  justly  indebted  to  the  said 

party  of  the  second  part  in  the  sum  of  dollars,  lawful 

money  of  the  United  States,  secured  to  be  paid  by  his  certain  bond 
or  obligation,  bearing  even  date  herewith,  conditioned  for  the  pay- 
ment of  the  said  sum  of  dollars,  on  the  day 
of  ,  nineteen  hundred  and  ,  and  the  interest  thereon, 
to  be  computed  from  ,  at  the  rate  of  per  centum 
per  annum,  and  to  be  paid 

It  being  thereby  expressly  agreed  that  the  whole  of  the  said 
principal  sum  shall  become  due  after  default  in  the  payment  of  any 
instalment  of  principal,  interest,  taxes  or  assessments,  as  herein- 
after provided. 

Now,  this  indenture  witnesseth,  that  the  said  party  of  the  first 
part,  for  the  better  securing  the  payment  of  the  said  sum  of  money 
mentioned  in  the  condition  of  the  said  bond  or  obligation,  with 
interest  thereon,  and  also  for  and  in  consideration  of  one  dollar, 
paid  by  the  said  party  of  the  second  part,  the  receipt  whereof  is 
hereby  acknowledged,  doth  hereby  grant  and  release  unto  the  siiid 
party  of  the  second  part,  and  to  his  heirs  (or  successors)  and  as- 
signs forever  (description),  together  with  the  appurtenances,  and 
all  the  estate  and  rights  of  the  party  of  the  first  part  in  and  to  said 
premises.  To  have  and  hold  the  above  granted  premises  unto  the 
said  party  of  the  second  part,  his  heirs  and  assigns  forever.  Pro- 
vided, always,  that  if  the  said  party  of  the  first  part,  his  heirs, 
executors  or  administrators,  shall  pay  unto  the  said  party  of  the 
second  part,  his  executors,  admini-^trators  or  assigns,  the  said  sum 
of  money  mentioned  in  the  condition  of  the  said  bond  or  obligation, 

761 


762  FORMS 

and  the  interest  thereon,  at  the  time  and  in  the  manner  mentioned 
in  the  said  condition,  that  then  these  presents,  and  the  estate 
hereby  granted,  shall  cease,  determine  and  be  void.  And  the  sai(' 
party  of  the  first  part  covenants  with  the  party  of  the  seconc; 
part  as  follows: 

1.  That  the  said  party  of  the  first  part  will  pay  the  indebtedness 
as  hereinbefore  provided  and  if  default  be  made  in  the  payment 
of  any  part  thereof,  the  party  of  the  second  part  shall  have  powei' 
to  sell  the  premises  therein  described  according  to  law. 

2.  That  the  said  party  of  the  first  part  will  keep  the  buildings 
on  the  said  premises  insured  against  loss  by  fire  for  the  benefit  of 
the  mortgagee. 

3.  And  it  is  hereby  expressly  agreed  that  the  whole  of  said  prin- 
cipal sum  shall  become  due  at  the  option  of  the  said  party  of  the 
second  part  after  default  in  the  payment  of  any  instalment  of 
principal  or  of  interest  for  days,  or  after  default  in 
the  payment  of  any  tax  or  assessment  for  days  after 
notice  and  demand. 

In  witness  whereof,  the  said  party  of  the  first  part  hath  here- 
unto set  his  hand  and  seal,  the  day  and  year  first  above  written. 
In  the  presence  of: 

The  following  short  form  of  instrument  for  mortgage  on  lease 
of  real  property  is  lawful  in  New  York  (Real  Property  Law,  sec. 
273),  but  the  use  of  other  forms  is  not  prevented  or  invalidated: 

MORTGAGE  ON  LEASE  OF  REAL  PROPERTY 

This  indenture,  made  the  day  of  ,  in  the  year 

one  thousand         hundred  and         ,  between  of  (in- 

sert residence)  of  the  first  part  and  of   (insert  resi- 

dence) of  the  second  part;  whereas  did,  by  a  certain 

indenture  of  lease,  bearing  date  the  day  of 

,  in  the  year  one  thousand  nine  hundred  and         ,  demise, 
lease  and  to  farm  let  unto  and  to  execu- 

tors, administrators  and  assigns,  all  and  singular  the  premises 
hereinafter  mentioned  and  described,  together  wdth  their  appur- 
tenances; to  have  and  to  hold  the  same  unto  the  said 
and  to  executors,  administrators  and  assigns,  for  and 

during  and  until  the  full  end  and  term  of        years,  from  the 
day  of  one  thousand  nine  hundred  and 

,  fully  to  be  complete  and  ended,  yielding  and  paying  therefor 


FORMS  7(33 

unto    the    said  and    to  or    assigns,    the 

yearly  rent  or  sum  of 

And  whereas,  the  said  part  of  the  first  part  justly  indebted 
to   the  said   part  of  the   second    part,    in    the   sum 

of  lawful  money  of  the  United  States  of  America, 

secured  to  be  paid  by  certain  bond   or  oblifjation. 

bearing  even  date  herewith,  conditioned  for  the  payment  of  the 
said  sum  of  on  the  day  of 

nineteen  hundred  and  and  the  interest  thereon  to  be  computed 
from  at  the  rate  of        per  centum  per  annum  and  to 

be  paid 

It  being  thereby  expressly  agreed  that  the  whole  of  the  said 
principal  sum  shall  become  due  at  the  option  of  the  mortgagee  or 
obligee  after  default  in  the  payment  of  interest,  taxes  or  assess- 
ments or  rents  as  hereinafter  provided. 

Now  this  indenture  witnesseth  that  the  said  part  of  the 

first  part,  for  the  better  securing  the  payment  of  the  said  sum 
of  money  mentioned  in  the  condition  of  the  said  bond  or  obliga- 
tion, with  interest  thereon,  and  also  for  and  in  consideration  of 
the  sum  of  one  dollar,  paid  by  the  said  part  of  the  second 
part,  the  receipt '  whereof  is  hereby  acknowledged,  doth  grant 
and  release,  assign,  transfer  and  set  over  unto  said  part  of  the 
second  part,  and  to  his  heirs  (or  successors)  and  assigns  forever. 

(Description) 

Together  with  the  appurtenances  and  all  the  estate  and  rights 
of  the  part  of  the  first  part  of,  in  and  to  said  premises  under 
and  by  virtue  of  the  aforesaid  indenture  of  lease. 

To  have  and  hold  the  said  indenture  of  lease  and  renewal,  and 
the  above  granted  premises,  unto  the  said  part  of  the  second 
part,  his  heirs  and  assigns,  for  and  during  all  the  rest,  residue  and 
remainder  of  the  said  term  of  years  yet  to  come  and  unexpired, 
in  said  indenture  of  lease  and  in  the  renewals  therein  provided 
for  subject,  nevertheless,  to  the  rents,  covenants,  conditions  antl 
provisions  in  the  said  indenture  of  lease  mentioned. 

Provided  always  that  if  the  said  part  of  the  first  part  shall 
pay  unto  the  said  part  of  the  second  part,  the  said  sum  of 
money  mentioned  in  the  condition  of  the  said  bond  or  obligation, 
and  the  interest  thereon,  at  the  time  and  in  the  manner  men- 
tioned in  the  said  condition,  that  then  these  presents  and  the  es- 
tate hereby  granted,  shall  cease,  determine  and  be  void. 


764  FORMS 

And  the  said  part  of  the  first  part  covenant  with  the  said 
part         of  the  second  part  as  follows: 

First.  That  the  part  of  the  first  part  will  pay  the  indebted- 
ness as  hereinbefore  provided. 

And  if  default  shall  be  made  in  the  payment  of  any  part  thereof 
the  said  part  of  the  second  part  have  power  to  sell  the  prem- 
ises therein  described  according  to  law. 

Second.  That  the  said  premises  now  are  free  and  clear  of  all 
incumbrances  whatsoever,  and  that  ha      good  right 

and  lawful  authority  to  convey  the  same  in  manner  and  form 
hereby  conveyed. 

Third.  That  the  part  of  the  first  part  will  keep  the  build- 
ings on  the  said  premises  insured  against  loss  by  fire,  for  the 
benefit  of  the  mortgagee. 

Fourth.  That  the  part  of  the  first  part  will  pay  the  rents 
and  other  charges  mentioned  in  and  made  payable  by  said  in- 
denture of  lease  within  days  after  said  rent  or  charges 
are  payable. 

Fifth.  And  it  is  hereby  expressly  agreed  that  the  whole  of  the 
said  principal  sum  shall  become  due  at  the  option  of  the  said  mort- 
gagee or  obligee  after  default  in  the  payment  of  any  instalment 
of  principal,  or  after  default  in  the  payment  of  interest  for 

days,  or  after  default  in  the  payment  of  any  rent  or  other 
charge  made  payable  by  said  indenture  of  lease  for 
days,  or  after  default  in  the  payment  of  any  tax  or  assessment  for 
da.ys  after  notice  and  demand. 

In  witness  whereof,  the  said  part  of  the  first  part  to  these, 
presents  ha      hereunto  set  hand  and  seal  the  day 

and  year  first  above  written. 

Sealed  and  delivered 
in  the  presence  of 


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